Strong Rise In Personal Incomes

The market is down only slightly this morning, which is normal given the strong rally yesterday. We got some good economic news, with personal incomes for May rising +1.4% vs. expectations for a +0.3% increase. Personal spending only rose +0.3%, in-line. People continue to hoard money, build savings, and hopefully pay down debt. At some point, this will lead to an unleashing of pent-up demand, and result in very strong economic growth.

All 10 of the major economic sectors were trading lower, but tech (XLK) just peaked into positive territory. Semis and biotechs are also strong relative to the overall weakness, while healthcare and staples are the biggest laggards. Energy and financials are mixed.

In the ag space, POT warned of lower revenues and weak demand. I would have expected all of the ag stocks to be down a lot more today as a result, but the love affair with these stocks has kept the selling muted at best. Odd. I still think these stocks will work lower as we get into earnings season.

Today's session could see some added volatility as it is the annual rebalancing of the Russell indexes around the close. So expect volumes to rise, although its always hard to game in what direction the buying/selling will push the market.

Asian markets were higher overnight; the dollar is lower, but oil (lower) and gold (higher) are mixed; the 10-year yield is lower to 3.50%; and the VIX is up slightly, but still low at 26.53 after a big plunge yesterday.

Trading comment: Yesterday's rally was along the lines of my expectations that the oversold conditions would lend themselves to a quarter-end rally. I sold my SSO yesterday, and I also sold all of our MOO after POT lowered guidance. I have not yet added to our etf hedges, but I am leaning toward doing so if it looks like the market is running out of steam into early July.