Major Shift to Risk to Start July

The initial phase of the month to date rally was thought to have been fueled by an overall collapse of commodities, hence the belief that inflation was abating. The way the minds of traders works is, less inflation equals less Fed hikes equals higher stocks prices because dogs are accustomed to eat when they hear the bell ring.

If you look at some of the raw commodities the past month they’re all down 10%+, some more severe. We had briefly begun to worry that commodities were dropping too hard, equating to a collapse of the global economy — but quickly rebounded from that train of thought last week with a stabilization of commodities and leadership in beaten down sectors like SAAS, biotech, electric cars and solar.

If you take a gander at some raw commodities the past week, the inflation scare might not be over.

Palladium +12%
Natural Gas +8%
Cattle +4.5%
Uranium +4%
Lithium +3%

I’d argue that absent an appreciable move higher in oil, these second rate commodities will be ignored by markets.

Oil was DOWN 2% the past week.

All biases aside, the market has plenty of room to the upside because of how much it has fallen. In Stocklabs we measure the avg loss of all stocks, some 5000+ names, and they are down 23% for the year. We can very easily rally another 5% from here and history would never even know it. To get there, in my opinion, we need commodities to stay put — not collapse and certainly not surge. If that can happen, coupled with stagnation in the Russian war, we can have a summer rally.

Of course I don’t believe it will happen and truly would like to root against it — but I don’t make the rules.