Weekly Trader's Outlook

If you read last week's blog, you might recall that I had a "Moderately Bullish" forecast, with the potential for higher volatility in the tech sector (due to quarterly earnings from Micron). At the time of this writing, the S&P 500 Equal Weight (SPXEW), Dow Jones Industrial Average ($DJI) and Russell 2000 (RUT) are on track for modest weekly gains. However, the Nasdaq Composite ($COMP) and cap-weighted S&P 500 index (SPX) are on track to be down 3% and 2% respectively on the week. The divergence has to do with a combination of selling pressure in the tech sector and money rotating into non-tech areas of the market. One of the catalysts impacting the tech sector was a 10% overnight drop in the Korea Composite Stock Price Index (KOSPI) on Tuesday, which is mostly made up of tech/memory giants SK Hynix and Samsung Electronics. Reports indicated that the swift drop was related to some de-leveraging of speculative positions. Keep in mind that margin debt in the U.S. hit a record $1.42T in May, in nominal terms. Additionally, year-over-year margin debt growth was recently reported to be more than 50%, a rate not seen since 2007 and is considered by some to indicate speculative excess. This week's selloff in tech likely wrung some of the leverage out of the system, but it's too early to say whether a sufficient washout has occurred on a near-term basis. One last note: some of the selloff in the tech space, which has been a stellar performer over the past three months, may be related to quarter-end rebalancing by major market players such as pensions and sovereign wealth funds.

As for Micron Technology's earnings report on Wednesday night, the company delivered a blowout quarter on earnings, margins, and guidance, and announced 16 new long-term agreements, which helped the stock notch a fresh all-time high on Thursday. There still doesn't appear to be any indication of a loss in pricing power or demand destruction for high bandwidth memory (HBM), at least not yet. However, concerns surfaced around the hyperscalers and other buyers of HBM due to the potential impact to their margins/profitability. For example, Apple announced a $200 or more price increase to their line of Macs and iPads, and the stock is on track to be down over 5.5% this week. The rest of the "Mag 7" also came under pressure this week, which explains this week's divergence in performance in the SPX vs. SPXEW.

Elsewhere, oil prices are on track to be down nearly 10% this week (WTI crude last seen trading around $69/barrel), which prompted as pullback in both yields and Federal Reserve rate hike expectations (more on this in the "Economic Data, Rates & the Fed" section below).

At the time of this writing (3:25 p.m. ET) all the majors are in the red after being higher earlier in the session (DJI - 63, SPX - 7, $COMP - 76, RUT - 16), as investors appear to be reducing positions heading into the weekend. It was a volatile week, particularly within tech, which may be due to a combination of seasonality (June is not great), quarter-end rebalancing and rotation out of tech (since that sector has been stretched and other sectors may benefit from declining oil prices). The near-term technicals are a bit split at this point in time: the S&P 500 equal Weight (SPXEW) and Russell 2000 (RUT) hit fresh all-time highs this week while the Nasdaq Composite ($COMP) dropped below its 50-day simple moving average (SMA) for the first time since early April and even the PHLX Semiconductor Index (SOX) is testing support at its 20-day SMA at the time of this writing. There are still a couple days left in the quarter, next week is holiday shortened due to July 4th, and we'll be getting the monthly jobs report, so I expect volatility will be higher than normal. While the broadening of the rally appears to be intact, and lower oil prices and yields are net bullish, I'm concerned about tech in the near-term. Part of the reason is due to the technical divergence I referenced, but I'm also concerned that the sector may be susceptible to some additional deleveraging. Therefore, I'm providing a "Moderately Bearish" forecast for the technology space next week, if tech continues to see additional selling pressure early next week, it's possible that money flows back into that space after Tuesday (i.e. quarter end), but overall investor sentiment and price action have seen a bearish shift recently, so I'll remain cautious until the technicals improve.

• Monday (June 29): no reports
• Tuesday (June 30): Chicago PMI, Consumer Confidence, FHFA Housing Price Index, S&P Case-Shiller Home Price Index
• Wednesday (July 1): ADP Employment Change, Construction Spending, EIA Crude Oil Inventories, ISM Manufacturing Index, MBA Mortgage Applications Index
• Thursday (July 2): Nonfarm Payrolls, Unemployment Rate, Average Hourly Earnings, Average Workweek, Business Inventories, Continuing Claims, EIA Natural Gas Inventories, Factory Orders, Initial Claims
• Friday (July 3): no reports

• Monday (June 29): AeroVironment Inc. (AVAV), Concentrix Corp. (CNXC), Quantum Corp. (QMCO)
• Tuesday (June 30): Barnes & Noble Education Inc. (BNED), Constellation Brands (STZ), Nike Inc. (NKE), Progress Software Corp. (PRGS)
• Wednesday (July 1): FactSet Research Systems Inc. (FDS), General Mills Inc. (GIS), Greenbrier Companies Inc. (GBX), MSC Industrial Direct Co. (MSM), National Beverage Corp. (FIZZ), UniFirst Corp. (UNF)
• Thursday (July 2): Anavex Life Sciences Corp. (AVXL), Bitmine Immersion Technologies Inc. (BMNR), Lindsay Corp. (LNN)
• Friday (July 3): no reports

There was a moderate dose of economic data for markets to digest this week, which was highlighted by the monthly Personal Consumer Expenditures (PCE) Prices report. The PCE report essentially came in as expected, but the annual gains are at multi-year highs. The core PCE services index ex-housing and energy, referred to as "supercore inflation," is tracking at 3.9% on an annual basis, which is considered a key indicator for the Fed. However, oil prices have dropped substantially over the past couple weeks, so the Fed can be relatively more patient, but we'll know more after Warsh's newly created committee's provide guidance around inflation metrics. Elsewhere, the Purchasing Managers' Index (PMI) manufacturing and services reports were strong, though prices are continuing to signal some inflationary pressure. Here's a breakdown of the reports:

• PCE Prices: Headline month-over-month (MoM) prices increased 0.4% in May, in line with April, but above the 0.3% expected. This translates into a year-over-year (YoY) gain of 4.1%, which was in line with estimates, but the highest reading since April of 2023.
• PCE Prices – Core: Core prices increased 0.3% MoM in May, which was in line with April and the 0.3% economists had expected. This puts the YoY basis at 3.4%, in-line with estimates but the highest reading since October of 2023.
• Q2 GDP – Third Estimate: U.S. gross domestic product rose at a seasonally and inflation-adjusted rate of 2.1%, up from the second estimate of 1.6% and above the 1.6% economists were expecting. However, consumer spending was revised significantly lower to 0.5% from the previously reported 1.4% pace.
• Personal Income: 0.7% vs. 0.3% est.
• Personal Spending: 0.7% vs. 0.2% est.
• S&P Global U.S. Manufacturing PMI - Preliminary: The index rose to 55.7 in June from 55.1 in the prior month, which represents a 49-month high. New Orders showed the largest rise since April 2022, but manufacturing employment was cut by the most since May 2020.
• S&P Global U.S. Services PMI - Preliminary: The index rose to 51.3 in June from 50.7 in May, which was above the 51.0 consensus estimate. Services input cost inflation rose to a six-month high, while selling price inflation reached an eleven-month high.
• New Home Starts: 580K vs. 620K est.
• Durable Orders: -4.5% vs. -3.5% est.
• Durable Orders ex-transportation: 1.3% vs. 0.4% est.
• EIA Crude Oil Inventories: -6.09M barrels.
• EIA Natural Gas Inventories: +76 bcf.
• Initial Jobless Claims: Initial applications for U.S. jobless benefits decreased 12K from last week's (upwardly revised) 227K to 215K, which was below the 220K economists had expected. Continuing Claims increased 21K from the prior week to a seasonally adjusted 1.82M.
• The Atlanta Fed's GDPNow "nowcast" for Q2 GDP was first revised down to 2.5% yesterday from 2.8% last Friday, primarily due to a downward revision in the consumer spending component.

U.S. Treasuries dropped across the board, and the yield curve experienced some steepening this week, primarily driven by the drop in oil prices. Earlier this morning, yields on two-year treasuries hit a 52-week high of 4.217% but subsequently pulled back. Compared to last Friday, two-year Treasury yields dropped ~9 basis points (4.088% vs. 4.179%), 10-year yields are down ~8 basis points (4.375% vs. 4.451%), while 30-year yields pulled back ~4 basis points (4.865% vs. 4.90%).

Market expectations around a potential rate hike from the Federal Reserve pulled back this week, primarily driven by the sharp drop in oil prices. Per the Bloomberg rate probabilities, the probability of a rate hike at the July Federal Open Market Committee (FOMC) is down to 30% from 38% last week, and the theoretical 100% probability of a rate hike has been pushed out to the December FOMC meeting from October last week.

Tech stocks came under pressure this week, despite a blowout quarter from Micron, as the Nasdaq Composite ($COMP) is on track to be down roughly 3% this week. Part of the reason for the sell-off was a 10% drop in the Korea Composite Stock Price Index (KOSPI) on Tuesday, where tech/memory giants SK Hynix and Samsung Electronics make up more than 50% of the index. Also negatively impacting the $COMP was a significant drawdown in the "Mag 7" cohort, which are all trading below their respective 50-day SMAs. This week's drop in the $COMP has taken the index below its 50-day SMA, which held up as a key support level back in early June, so the technicals shifted bearishly this week. The good news is that the $COMP appears to have found some support at the 25,000 level today, a level where it bounced back on June 9th. Additionally, Nasdaq 100 index (NDX) bounced off its 50-day SMA today. However, caution is still warranted from a technical perspective until the $COMP gets back above its 50-day SMA.

Near-term technical translation: moderately bearish

The S&P Equal Weight index (SPXEW) notched another fresh all-time high this week, supporting the notion that the rally in stocks is seeing broader participation, which is generally a healthy sign in a bull market. Once again, the index found near-term support at the 20-day Simple Moving Average (SMA), which speaks to underlying demand on pullbacks. Therefore, the technicals on this index remain bullish, even though the technicals on the market-weighted S&P 500 index (SPX) is a little more challenged.

Near-term technical translation: bullish

The Bitwise 10 Large Crypto Index is down 9% since last Friday, with bitcoin down 7% and ether down 10% at the time of writing. As investors repositioned for potential rate hikes following yesterday's upward revision of GDP and the latest PCE data, bitcoin briefly made a new intra-day low due to higher rates and a rising dollar. While investors may be starting to discount hikes, Schwab's head of fixed income research, Collin Martin, makes the case that the bar for rate hikes remains higher than recent data suggests. On-chain derivatives positioning suggests bitcoin may be broadly de‑risked at current levels, which could reinforce prior support even as macro volatility persists.

Perpetual futures funding rates remain positive but subdued, indicating limited directional imbalance rather than strong bullish positioning. At the same time, open interest is relatively low, suggesting reduced aggregate leverage, which may limit the scale of forced liquidations, though it does not fully capture positioning concentration.

In options markets, skew remains positive, indicating that downside protection continues to trade at a premium to calls. However, the prior widening in this premium from mid‑2025 through early 2026 has stabilized, with relative put versus call pricing no longer increasing. This may indicate that the incremental bid for downside protection has moderated.

These metrics, combined with weakness in spot markets suggest bitcoin positioning is washed out at these levels, suggesting prior levels of support may continue to hold, even if bitcoin briefly trades below them on some days.

The Bloomberg chart below shows the current percentage of members within the S&P 500 (SPX), Nasdaq Composite (CCMP), and Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). In short, the stock market has been going through rotation as the market-weighted S&P 500 and Nasdaq indices are on track to be down on the week, but the S&P 500 Equal Weight index (SPXEW) and Russell 2000 (RUT) are higher on the week. In fact, both the SPXEW and RUT hit fresh all-time highs this week. The improvement in market breadth this week conveys this broadening rotation that has been underway. Compared to last Friday, the SPX (white line) breadth is essentially flat at 63.00% versus 61.40%, the CCMP (blue line) eased to 44.72% vs. 43.66%, while the RUT (red line) declined to 64.43% from 60.36% (all week-over-week).

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, percentage of stocks within an index that are above or below a longer-term moving average, or new highs vs. new lows.

This Week's Notable 52-week Highs (122 today): American Airlines Group (AAL + $0.18 to $17.75), Cardinal Health Inc. (CAH + $4.49 to $239.24), Etsy Inc. (ETSY - $0.17 to $77.53), GE Aerospace Inc. (GE - $1.72 to $369.64), Sharkninja Inc. (SN + $0.32 to $143.17), Target Corp. (TGT + $1.53 to $141.10)

This Week's Notable 52-week Lows (94 today): AeroVironment Inc. (AVAV + $5.61 to $142.29), Booz Allen Hamilton Holding Corp. (BAH + $0.95 to $60.66), CME Group Inc. (CME - $1.17 to $223.83), Netflix Inc. (NFLX + $3.52 to $74.42), Nike Inc. (NKE - $0.05 to $40.85), Strategy Inc. (MSTR + $1.13 to $86.46)