• Soccer (football) finally takes the US by storm.

• Not a lot of earnings or economic data this week, but that doesn’t mean it will be a quiet one.

• The positioning in the yen…and the technical set-up in other parts of the currency market…could create some surprising moves in several different asset classes this summer.

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• The earnings report out of Micron is helping the stock market rebound in a big way this morning. However, the Mag 7 names are actually lower this morning…after already falling into correction territory. If they continue to decline, it’s going to be very tough for the major averages to rally much further……Yes, the news out of Micron is very positive, but it might not be sending up the kind of “all clear” signal that some are assuming this morning.

A decent sized reversal which began late in the morning yesterday caused the stock market to see its third decline in a row…and its 5^th decline in six trading days. However, we’re seeing a very strong bounce this morning…as Micron (MU) reported very strong earnings after the close last night. Their sales forecasts were particularly strong…and they announced that they have secured the kind of long-term customer agreements that will help them navigate any downturn over the next few years.

That news also has MU trading higher by 17% as we write this morning…which means that it will erase all of the losses from yesterday’s big decline in the stock (and even push it slightly above its highs from Tuesday’s close). This news is also helping the index futures bounce from their three-day decline…and although they only retraced about 1/3 of their recent losses, it’s still a positive development for the stock market. In other words, unless we get some sort of delayed “sell the news” reaction in the tech sector over the next two days, this news should bode well for the market holding up through the end of Q2 (on Tuesday).

The news from MU will also help the SOX semiconductor index retrace more than half of its recent decline. Therefore, if this KEY leadership group can continue to push higher, it should be positive for the overall equity market as well…especially if it can rally to another new all-time high as we move into the third quarter.

It is worth noting, however, that the MAGS Mag 7 ETF is actually pointing to a slightly lower opening today. The drop will only be about 0.3%...based on where it’s trading in the pre-market as we write…but given that the S&P futures are trading higher by 0.6%...and the NDX futures are trading higher by more than 2%...this action in the Mag 7 group is quite disappointing.

On the one hand, this could merely be indicating that the tech sector is continuing to see some “rotation” WITHIN the different groups of that sector. However, the fact that the IGV software ETF is also trading lower (by about 0.75%), shows that more than one group is not going along with this morning’s rebound. As we highlighted last weekend, it was fine when ONE group (the software group) was falling while the rest of the rest of the sector was advancing earlier this year (especially given the reasons WHY the software group was falling). However, when you see another group within the sector seeing some meaningful weakness, it should raise some questions in investors’ minds.

Let’s face it, the MAG 7 stocks now account for more than 35% of the S&P 500…and almost 50% of the NDX Nasdaq 100. Therefore, if they decline as a group in any meaningful way, it’s definitely going to weigh on the major averages. The MAGS ETF is already in correction territory…down more than 11%...and it’s something that could/should create some problems for the broad market…if (repeat, IF) it continues as we move into Q3.

Don’t get us wrong, the news out of MU this morning is very bullish. It’s just that a few cracks have developed in the tech sector recently…on both the fundamental side…and the technical side of things. Therefore, we believe it will be extremely important to watch how these hyperscalers trade going forward…because if they continue to decline, it’s going to make it VERY tough for the rest of the market to advance.

These names are just too highly weighted in the SPX & NDX for them to avoid having a big impact. And if the major indices fall in any meaningful way, the individual investor (who has become so important in today’s market) will start to “rotate” towards cash…not other groups…especially given how many times they’ve heard the term “bubble” over the past year.

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The bulls remain in charge of the stock market right now…and there are reasons to think that can continue. HOWEVER, there are some important reasons to think this trend could change soon…especially after last week’s first Fed meeting for the new Chairman.

We will cover how to best take advantage of the market if it continues to rally…AND what to be watching for…to tell us if a meaningful reversal is about to take place.

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• As we highlighted in our weekend piece, the dollar/yen cross is becoming quite overbought…and the sentiment on the yen has become very bearish. Therefore, the odds of a reversal here are quite high…and this could/should have a negative impact on the “yen carry trade.”

• We’d also note that the dollar is getting overbought against other currencies, so the DXY dollar index is also getting ripe for a pullback. If that happens, it could/should have a compelling impact on other asset classes as well.

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Announcement: Mark your calendar! The “Maley Report Live” will be open to anyone and everyone for our next edition…on Monday at noon, June 22nd! (If you are receiving this piece today, you will also get an invitation email sent to you at noon on Monday.)…......Given this week’s new developments on the geopolitical front…as well as with the Fed…we will be talk about why they should have a profound impact on the markets. Therefore, we’ll be discussing how to best profit from these changes in the second half of this year.

• Chairman Warsh’s press conference was more hawkish than expected…and it created the worst day for the stock market (in terms of the “internals” in several months). However, the signing of the deal that will reopen the Strait of Hormuz has the stock market bouncing back nicely this morning……Today could/should be a quiet one for the markets, but next week should be very important…after investors get the long weekend to decipher what this week’s new developments mean for the economy and the markets.

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• The action in the stock market yesterday shows that the tech stocks are still THE key leadership group…and that “rotation” will not take place if this group sees any kind of material weakness.

• There are certainly reasons to be bullish on the bank stocks. However, there are also some issues which could quickly create some serious headwinds for this group. Therefore, it’s post-Fed meeting action will be extremely important.

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• The news that the Strait of Hormuz will begin to reopen is creating strong moves in many markets. Most of these moves have taken key indices and ETFs up to key resistance levels (or down to key support levels in the case of crude oil). So, it won’t take much more follow-through this week to embolden the bulls as we move deeper into the summer months.

• As we highlighted in our weekend piece, if (repeat, IF) the stock market is indeed toing to rally further, we believe areas other than tech will see the best performance. Some of these are specific stock sectors…while a few others come from different asset classes.

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• Even Celtics fans enjoyed last night’s big comeback victory for the Knicks!

• More technical damage was done to the tech sector yesterday, BUT one key index is still holding it KEY support level.

• We hate to sound like a broken record, but it is essential to keep a VERY close eye on the all-important support level of the chip stocks.

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• The stock market saw a nice rebound yesterday...and the futures are pushing higher again this morning. So, this is giving investors a nice sigh of relief. Whether this rebound can continue or not will likely depend on this week’s inflation data...and the quality of the reception of the SpaceX IPO on Friday. HOWEVER, tomorrow’s results out of Oracle could turn out to be the most important development of the week.

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• The stock market was able to see some nice “rotation” yesterday, so the weakness in the tech sector did not do any harm. However, it will be very hard for a “harmless decline” in tech to continue…if (repeat, IF) the weakness in the that sector becomes more pronounced.

• This morning’s employment report should be even more important than usual…given that long-term bond yields stand at a KEY technical level…and that a new Fed Chairman was just sworn in.

• “OK, we’ll go.”…….Those were the most important words spoken in the 20^th century…and they were spoken 82 years ago today.

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• The private credit market is seeing some renewed stress…much like we thought it would in June.

• If the tech sector sees a pullback, it could/should give the crypto market some relief…given that Bitcoin has become very oversold and sentiment has become very bearish. (“Rotation” in the other direction soon…out of tech and into Bitcoin?)

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The rally in the stock market lost some of its momentum yesterday, but it was still able to finish the day in the green. After a strong bounce over the previous seven weeks, the software stocks finally saw a pullback, but this was offset by yet another positive day for the chip stocks. In fact, the SOX semiconductor Index jumped another 5.8%...and closed on its highs for the day. This means that the rally off the late-March lows has now reached a whopping 92% over the past 9.5 weeks! So, the demand for this key group remains quite robust.

We do need to point out that the SOX is now reaching the kind of overbought levels that it reached at the top of the internet bubble of 2000. This reading has now 88.18 vs. the 89.04 it saw in March of 2000…and this index looking higher once again this morning, its overbought condition is basically going to reach the same level it did back in 2000 this morning.

Of course, this does not mean that the group is about to make a significant top right now. In fact, it doesn’t even mean that it will even make a minor top…and thus take a breather over just the near-term. However, it does show that this all-important group is approaching the kind of extremely stretched levels on a technical basis that has been followed by pullbacks in the past, so investors and traders should take notice. (First chart below.)

That said, the NDX futures are trading higher again this morning, so even though the SPX futures are trading slightly lower, investors don’t seem very worried about these issues. However, with some new (negative) news on the private credit front, there are some OTHER reasons to think that the market is ready for a pullback at some point soon…..Cliffwater has capped the redemptions for their flagship credit fund at 5%...and Partners Group has done the same. (The former said they’ve received 17% redemptions…while the latter says their redemptions were almost 10%.)….So, the issue of private credit is rearing its ugly head again…must like we thought it would in June.

This has stocks like Blackstone (BX), KKR (KKR), and Blue Owl (OWL) trading lower again this morning. The bounce in these stocks off their March lows had been pretty feeble compared to the rest of the stock market, so this renewed weakness is another reason to be careful about chasing the stock market rally over the near-term…given the parabolic nature of the rally for many stocks. (Marvel’s 32% jump on a merely quip from Jensen Huang is one thing…but a 48% jump in Victoria’s Secret takes it to a whole new level!)

If (repeat, IF) we finally do see a pullback in the stock market…led by a pullback in the tech sector…it should be something that will give Bitcoin some relief. There has been a lot of talk about how Bitcoin has become a source of funds for investors to buy the chips stocks and other AI related stocks. So, if the group finally does take a breather, this could/should help the crypto market see a bounce.

The decline of the past few weeks in Bitcoin has taken it to an oversold level…and has also taken sentiment to an extremely low level…with the percentage of bulls among the futures traders falling to just 10%. Yes, it has become more oversold before it has bottomed in the past…but not a lot more oversold. Thus, Bitcoin is getting ripe for a bounce soon…and it wouldn’t surprise us if the catalyst for such a bounce came from a breather in the tech sector. (Second chart below.)