Author: jsc

Summer liquidity conditions usually produce choppy price action where each day seems to have its own narrative.

Summertime liquidity conditions and the potential for risk-off positioning into September macro data/seasonal weakness add incremental caution to our tactically bullish outlook.

Yesterday’s broad rally saw ~80% of the SPX finish higher led by high-beta segments that gained +2.8% (1.5z move).

The July CPI report falls into the ‘better-than-feared’ category with the headline and core rate in line with consensus at +0.2% and +0.3% MoM, respectively.

Core CPI will be the focus tomorrow where we look for a +0.33% MoM increase, which equates to +3.1% on a YoY basis (a tick higher than consensus.

In the short-term, stock prices rise and fall based on earnings estimate revisions – and estimates revisions have been higher this quarter.

Our tactically bullish fundamental outlook from mid-May required continued positive earnings growth, U.S. economic resilience, and improving trade rhetoric/lower effective tariff rate.

Friday’s sell-off in the SPX slowed on its approach toward technical support in the 6140-6205 zone.

The high-beta trade appeared exhausted on Monday after factor-specific sentiment reached meme stock (GME) highs from 2021.

Yesterday was the first obvious day of rotation out of high-beta equity groups into quality (earnings growth).