[Chart courtesy of MarketWatch.com]

1. Moving the markets

Equities started the session in the positive, before a mid-day pullback interrupted follow through buying from yesterday. The pause was short-lived and, despite conflicting economic data, the bulls charged ahead with the major indexes closing around their session highs, despite yesterday’s short squeeze running out of ammo.

ADP payroll data painted a bleak picture with only 27k job additions for May vs. an expexted 185k, which was the weakest growth since early 2010. That was another feather in Fed’s cap, since it may find even more justification for another cut in interest rates.

This was the reasoning behind today’s rally, which was boosted by hopes that the global economy is deteriorating fast enough to validate a cut, perhaps as soon as this month, to avoid a possible recession. At least that’s how the theory goes.

Some strategists are pointing towards the disconnect between the economy and stocks, which has reached a record high, making the case for a potential return to bear market territory, along with a revisit of the December lows, a real likelihood.

Economist David Rosenberg summed things up in this concise tweet:

Does this chart look bullish? 16 months of nothing except the dividend, volatility, and acute anxiety. The S&P 500 has crossed above and below the 2,800 threshold no fewer than 19x since first testing the milestone in Jan/18. Looks like an elongated topping formation to me.

I could not have said it better myself.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

A couple of positive developments combined forces to help the market crawl out of a hole and ramp higher after the miserable month of May. The major indexes gained above 2%.

Getting things started right at the opening were these conciliatory words from China in regards to the recent trade war escalation:

1. CHINA HOPES U.S. TO STOP WRONG DOINGS, MEET CHINA HALFWAY
2. CHINA COMMERCE MINISTRY SAYS THE DIFFERENCES AND FRICTIONS BETWEEN CHINA AND THE U.S. SHOULD BE RESOLVED THROUGH DIALOGUE AND NEGOTIATIONS

That was enough meat on the trade bone for the headline-scanning computer algos to send stocks sharply on a northerly direction. Along that path, we witnessed the biggest short-squeeze  since the first week of 2019.

To support an already positive day for the bulls, Fed chief Powell was interpreted by some traders as having admitted to open the door to a rate cut. He said that the Fed would “act as appropriate” to sustain the expansion. These remarks came after Fed President Bullard uttered on Monday that rate cuts “may be warranted soon” given the international trade disputes.

That’s all it took to push equities out of the doldrums, even as economic data points were anything but positive. We saw that global manufacturing contracted to a 7-year low, while U.S. factory orders showed the slowest growth since Trump’s election.

The S&P 500 managed to not only reclaim its 2,800 level but also its technically important 200-day M/A. The Dow climbed back above its 25k milestone marker, while the Nasdaq ended up wiping out some of its recent losses.

Lagging behind the S&P 500 today, but remaing ahead during this current Domestic Buy cycle, was the low volatilty ETF SPLV, which performs better when markets are mired in uncertainty and not shoot straight up, as we saw today.

At least for the moment, our Domestic TTI moved back into bullish territory after having danced around its trend line for the past week. The question remains as to whether today was an outlier or the resumption of the interrupted uptrend.