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Things you need to know.

  • US futures are UP, Oil is UP, Cryptos are DOWN, 10 Yr is flat
  • It’s a new month and the mood is bullish, the VIX remains complacent
  • Key data points this week – both the ADP employment and Non Farm Payrolls report
  • Next Fed meeting June 15th – 16th.  4 Fed Presidents to speak on Wednesday
  • Try the Roman Style Chicken

It is Tuesday, June 1st – the final month in the 2nd quarter of 2021….and markets remain strong, near their highs, as investors/traders/analysts and economists attempt to decipher what is going on with the economy, the FED, monetary policy, tax policy and infrastructure policy.  Futures are higher this morning and the national and global mood is bullish….

The month of May saw stocks and crypto currencies make dramatic moves, causing many to wonder what is next.  The Dow gaining nearly 2% for the month while the S&P advanced 0.55%.  The Nasdaq gave up 1.5% and the Russell eked out a 0.4% gain.  Bitcoin – which has had a tough couple of months lost 35% in May, but that hardly tells the story of the volatility that we witnessed that saw a stunning 43% decline during the two weeks between May 7th and May 23rd rattling investor nerves and causing many to opine on the demise of cryptos….while others went all in claiming that its infancy was responsible for the volatility…..which, while true doesn’t make it any less unnerving.

It now looks to be forming a classic head and shoulders charting pattern – setting it up for potentially more volatility in the weeks ahead….  The January action represents the left shoulder while the February to mid-May action represents the head, and the most recent action appears to be building the right shoulder of the pattern….  A trendline drawn at the ‘neck’ suggests that $30,000 ish is still the level to watch…a level that it tested on May 19th.   Should it break that level then the chart suggests that it would fall another 30% until it found support at $20,000 – a move that is sure to shake the crypto markets and the broader markets.  In any event – this is sure to be top of mind this month….and is something that you should keep your eyes on.

The eco data on Friday continues to show mixed results but the key data point on Friday was the PCE (Personal Consumption Expenditure) Core Deflator report – showing a rise in inflation of 3.1% – up from 1.8% last month – but that did not cause investors to run for the doors nor did it cause the 10 yr. treasury to spike.  In fact, the 10 yr. FELL on Friday ending the day yielding 1.6%.  And this suggests that the whole inflation fear story is just that a ‘story’ and that investor concerns are overblown.  In fact, our friends at Goldman are now suggesting that the any inflationary pressures we are seeing is ‘good’ inflation – driven by accelerating growth and an improving economy vs. ‘bad’ inflation that is driven by an aggressive monetary policy mistake.  And THIS is going to be key going forward – and we know what Fed Chair Jay Powell thinks. (And it is not because of any monetary policy mistake) while other members of the FED may not be in the same camp.  June 15th– 16th   is the next FED meeting and it will reveal the latest in FED think. Expect all kinds of speculation in the next two weeks as everyone tries to handicap what the next FED move will be. Jay Powell remains in the ‘stay the course’ mindset – suggesting that there is nothing going on here at all…. inflation is not an issue, and the rates will remain near zero for another two years.

On Wednesday we will hear from 4 Fed Presidents – Harker, Evans, Bostic and Kaplan – what will they have to say?

This is a holiday shortened week – and this morning US futures are solidly higher – building on gains from last week…. – the Dow is up 171 pts, the S&P ahead by 18 pts, the Nasdaq is up 45 pts, and the Russell is ahead by 12 pts.  There is a lot of macro-economic data this week to watch but the big events will be Wednesday’s ADP employment report and Friday’s Non-Farm Payroll report….

10 yr. Treasuries are yielding 1.61%, the Dollar index closed at 89.79, Gold is up $8 at $1,913/oz, Bitcoin is trading at $36,000 and Ethereum is at $2,500.  WTI crude is UP $2 or 2.8% at $68.22……only $1.78 away from $70.  Demand is strong expect gasoline at the pump to continue to rise as well.  Shall I say anything else?

European markets are up this morning after waffling around yesterday.  Final IHS Markit Manufacturing PMI rose to 63.1 – beating the estimate of 62.8 and notching a record high leaving this index solidly in expansion territory. Factory orders in the UK rose to 65.6 up from 60.9 as a boatload of new orders drove the industrial resurgence. In mid-morning trade we see the FTSE +1.24%, CAC 40 +0.77%, DAX +1.46%, EUROSTOXX +1.11%, SPAIN +0.35% and ITALY +1.25%.

The S&P closed at 4204 – after trading as high as 4218…. this morning’s futures action suggests that we will hit Friday’s high as the opening bell finishes ringing setting us up for that test of the all-time high at 4230.  If we follow in Europe’s footsteps, we could see the S&P make another intraday record as well as a closing record.  The broader channel is now 4115 (50 dma) and 4300 – trendline resistance.

I am still in the cautious camp and continue to believe that volatility is NOT over.  Which does not mean that I am running for the door at all, but I am taking advantage of any price moves to trim, while continuing to put money to work into names (sectors) that are underperforming.

Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss the markets or a plan.  You can now get a video version of this note on my YouTube Channel.
You can follow me on Twitter – @kennypolcari

Take Good Care

Chief Market Strategist, Consultant

Roman Style Chicken

Paese lato di Roma – means the Countryside of Rome and it is here that we get today’s recipe…. This meal is hearty, voluptuous, aromatic, a taste tantalizing sensation…….the Italian countryside is renowned for its unique artistic heritage, its beautiful mountains, villages, people, and landscapes…. This meal comes from the heartland….

You will need:  Chicken breasts and thighs on the bone, S&P, Olive oil, red, green, and yellow bell peppers, prosciutto, garlic, can have diced tomatoes*, white wine, thyme & oregano (fresh is always better), chicken stock, capers, and parsley (for color).

Begin by seasoning the chicken with S&P.  In a heavy skillet – heat olive oil – enough to cover the bottom of the pan, When the oil is hot – then brown the chicken on all sides – remove and set aside.

In the same skillet – turn heat to med – add sliced peppers and chopped prosciutto – sauté until the peppers are soft and the prosciutto is crisp…. (no longer than 5 / 8 mins), next add chopped garlic (not minced) cook for another min or two…. add diced tomatoes, about 1/2 – 3/4 cup of white wine and oregano/thyme.

Scrape the bottom of the pan.  bring to a boil – add back the chicken and chicken stock (about 1/2 – 3/4 cup) bring to boil again…. now reduce heat to simmer and cover.  Cook for about 30 mins longer.  Once ready – add about 2 tblsp of capers and chopped parsley for color – mix and serve on a warmed platter – family style – and present in the center of the table.

Accompany with a large green salad of arugula, spinach, and bib lettuce, sliced tomatoes, red onions, and cucumbers – dressed in a balsamic vinaigrette.  Your choice of a light red wine – nothing to heavy or a chilled white would work fine with this dish.

Buon Appetito.