Does Tuesday's market rally have legs?
As markets returned from the long weekend, Action Alerts PLUS investing club co-portfolio managers Bob Lang and Chris Versace broke down the technical landscape and what to watch in a busy week of earnings and economic data.
FULL VIDEO TRANSCRIPT BELOW:
BOB LANG: Well, last week's poor performance followed up another poor performing week. And June, we find ourselves down about 11% for the month. For the quarter, actually, Chris, from April through the more recent dates in June, we're down about 19%, which is pretty stunning when you think of just a short period of time to be down that much. That's almost a whole year's worth of action in just one quarter.
So we are pretty oversold on certain metrics. The one metric that I took a look at this week was pretty rare. We saw on the weekly chart on the S&P 500, we touched down at about 30% on the RSI, Relative Strength Index. And again, that's pretty rare. We did hit that level a couple of weeks ago on the S&P 500, bounced a little bit, and we're getting a little bit of a bounce today off the three-day holiday.
But again, as I mentioned before, eight different times since the beginning of April, we've seen big, huge rallies just sell off the following day, losing all of it, if not most of it, the whole entire day. So I'm not convinced yet that this is something that we need to be serious about for the bulls until we get some follow-through. If we get another update tomorrow, maybe later on this week, we might get a nice finish and close into the end of June. But for now, it's just a bear market rally and likely that people are going to be selling into this rally.
CHRIS VERSACE: Well, Bob, I'll take the other side of that. I think we're going to start kind of quiet. Equities look like they are indeed trying to claw back some of last week's losses. But as we move through the week, we're going to see a lot more data coming through. We've got several companies-- FedEx, BlackBerry CarMax, Darden-- reporting their earnings late in the week. That's going to give us some fresh insight to what we're likely to hear when the June quarter earnings season kicks into gear in a couple of weeks.
We'll also be getting the flash PMI for June. That's going to tell us how did the economy really fare in the June quarter. What's the latest on inflationary pressures and passthrough of pricing? So the market could get a little more turbulent later in the week. We also have a big tech conference this week by Bank of America. And I think it's going to be even more important than we've seen in recent weeks. And I say that because yesterday, while the markets were off, Himax Technologies cut its outlook for the June quarter. So I think people are really going to be on edge. For us, it'll be business as usual, continuing to parse the data and updating our investment mosaic as we go through the week.
Want to know how Chris and Bob are approaching markets today? Check out Action Alerts PLUS here.