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Todd Harrison: The Bears Come Out Swinging in June


Levels and themes to watch as we approach the summer solstice.

Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO.

 Summer, summer, summertime; time to sit back and unwind.
-- DJ Jazzy Jeff and the Fresh Price

The June moon is upon us, and you know what that means: The unofficial start of summer has arrived, along with a seasonally weak period for the stock market.  While pundits publically pooh-poohed "sell in May and go away," that celebration may prove particularly premature. Come September, we'll see if there is truth to that time-tested market axiom.

We circled several charts on Friday, which can be found here; they included S&P (INDEXSP:.INX) 1900 (new support; potentially works to 1975 through a pure technical lens), the Bloomberg Smart Money Index (updated in the first chart below), divergences in the banks and small caps (traditional leaders for the broader tape), and the here-and-now importance of Nasdaq (INDEXNASDAQ:NDX) 3740, a 14-year high that bears (and bulls are) watching.
The Bloomberg SMART Money Index:

Tech is testing Y2K levels:

Not all Mondays are created equal, and as such, we'll dive right in with some Random Thoughts, in no particular order:

  • You typically see monthly flows (either/both ways) to start a new month; it's not as pervasive as quarterly (annual) rebalances, but that could come into play today. 
  • The Russell 2000 (INDEXRUSSELL:RUT), as discussed, is again underperforming today.  It's been hugging the 50-day moving average the last few sessions (RUT 1135), above the technically more important 200-day (RUT 1120).
  • I'm seeing more and more private equity deals in the cannabis space; remember, this is the time to be more selective in how you play that secular bull. The first phase -- blind ambition with anything tangentially related to cannabis -- is, or will soon be, over.
  • The corporate bond market continues to trade like equities are north of S&P 2000; the question becomes whether they'll be the "close your eyes and follow them" tell that they were for so long. 
  • For what it's worth and so it's said, I don't believe the next crisis will look anything like past crises; that would be too easy.  Perhaps it's a structural reaction to negative real interest rates in the ECB, which is all but a given this summer?
  • Market breadth 2:1 negative on the Big Board and 3:1 negative on the Nasdaq.  S's over N's; you know the drill.
  • More than 70% of analysts have a "hold" or "sell" on Twitter (NYSE:TWTR), which is bullish. When that flips, it will be a warning sign.
  • I've had more meetings than e-Harmony users following the recent Jerry Maguire-esque mission statement.  The situation remains fluid but what I can say is that the feedback has been extremely supportive of the pivot. 
  • Gold $1,200 is the level for the yellow metal.
  • Frank the Tank and I had a similar Saturday planned.
  • It must be nice to plunk down $2 beans for an NBA franchise and have that represent less than 10% of your net worth.  Somewhere out there Paul Allen must be quietly shaking his head.
  • The greatest trick the devil ever pulled was convincing the world that risk doesn't exist.
  • Trading Commandments work for a reason.
  • Steer clear of leveraged ETFs unless you know the ins and outs of compounding.
  • If you were a bull on Germany and used DAX (INDEXDB:DAX) 9K as your stop, you've had a nice six weeks.
  • Health and family, family and health.  Everything else will fall into place.

Twitter: @todd_harrison

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