May 30, 2023
Good morning,
We enter this holiday shortened, final week of May with markets looking pretty good for the moment. Investors did not sell in May and go away. The debt-ceiling issue has apparently been resolved (Futures are up another +.50% this morning pre-market). Treasury yields have fallen across the curve and the Bill market has normalized. The S&P 500 Index was up +0.32% last week, rescued by Friday’s +1.3% jump on debt-ceiling progress. It did end the week at its 9-month-old resistance lever (4,200). Should we extrapolate these good feelings out through the summer and expect the continuation of an okay, but-not-great rally? That might be asking too much.
Last week we covered the notion that technically our current rally is not reflecting much strength, primarily because only a handful of stocks have driven it. As of last Friday, another cautious signal was added to the list of concerns about this rally – overly bullish sentiment. The market signaled a short-term overbought signal on Friday.
Of course, there remains the specter that Congress could actually vote the agreement down — remember the initial failure to pass the TARP legislation at the height of the GFC?. That being said, a successful extension of the debt ceiling combined with some hot data over the next couple of weeks could bring Fed rate hikes back into play, and T-bills offering 5%+ yields certainly provides some stiff competition to any equity not in the throes of AI fever.
Be well,
Mike