Supply of shares in the equity markets continues to shrink with increasing takeouts and buybacks. Clearly, not a new observation as stated several times before. Lack of supply causes markets to go higher and puts further pressure on short positions. Despite technically overbought markets, there is an upside bias from various angles. And mainly, no compelling reason for investors to cash out heavily. Earnings look good for the most part and sideline players are ready to add to long positions. Also, sentiments are not insanely bullish as the bearish camp maintains their view. For example, the NASDAQ short interest soared by22% this month. This displays that a negative market view is not that differentiated.
At the same time, the faith of private equity should take longer to materialize. This can be an additional hurdle for short positions. Regardless, there are theme specific opportunities both in macro and stock specific trends.
Given the difficulty of timing pullbacks, I continue to watch for a recovery in the
10 year yield: Continues to rise. Next resistance is 4.90 a peak level from January 26. Uptrend intact, and expect further upside move despite overbought conditions.
Crude: 3+ month trading range between $62-66. Outside of a geopolitical risk, I except prices to stabilize at current range.
Natural Gas: Narrow range 7.81 (15 day mva) and 7.10 (200 day mva). Expect further consolidation with heavy resistance at $8.
Gold: Near-term trend remains negative. Following the 691 highs in April. Looking for support around 640. (635-- 200 day mva).
Canadian Dollar: Strength continues with next resistance level at 0.95. Those were last visited in 1976 as the recovery continues from 2003 cycle lows.
Yen: Deeply oversold with lows closer to mid February.
AMD: continue to favor the recovery from oversold levels. Also, it is the 3rd heavily shorted stock in the S&P with a 5% increase in short interest since April.
SNDK: Holding above support level at $40. Slowly, continue to build long position.
XLV: Healthcare ETF- Favor long position. On a relative basis, the index underperformed the S&P 500 and poised for a recovery.
A chart that stands out is the Powershare Nanotech portfolio. PXN - Lux Nanotech Portfolio In examining the components that make up the index, FLML stood out.
FLML: A French drug name with nanotech exposure. Recent surge took a slight breather, and offers attractive entry point.
Media: (From a long-term trend remain positive)
CMCSA :growing short interest. Accumulate closer to $26.
MCCC:Long-term trend remains positive. Continue to add on any weakness
CBS: Recent highs with positive momentum. Favorable part of a cycle recovery.
