The markets are still positive and the HCM-BuyLine® remains in an uptrend. With that said, it is starting to look and feel a bit top-heavy. News on inflation has been, as they say, sticky, but there have also been areas where inflation looks like it might start to crack. If so, look for the bond market to rally as interest rates should drop organically with the anticipation of the Fed lowering rates.

6-4-24-REGN

Chart: REGN 1-year daily

Biotech has been trading better, as identified by IBB, the iShares Biotech ETF which crossed back above its 50-day moving average. Three biotech stocks that look attractive to us are Merck (MRK), Regeneron (REGN), and Moderna (MRNA). From a technical point of view, all three look poised to move higher.

6-4-24-CRM

Chart: CRM 1-year daily

Salesforce (CRM) took it on the chin last week with a nasty drop. The drop came after Wednesday when Salesforce reported fiscal first quarter results that missed Wall Street’s revenue estimates for the first time since 2006. It also gave lighter-than-expected guidance. The stock should re-test the lows set last week around $216/share, which could be an area to look to buy. Salesforce could be a very big winner in the development of AI, and they have a very reliable monthly subscription revenue.

6-4-24-TLT

Chart: TLT 1-year daily

The 20-year Treasuries are in a clear downtrend, but any news that inflation might be softening will move bonds higher, and probably at a fast pace. Look how TLT is starting to make a short-term higher low. It’s early, but everyone should be watching the bond market, as it will probably tell us a lot about where inflation is headed. If TLT breaks above that line of resistance, look for a fast move back up to the $100 area.

Q1 real GDP growth was revised down to a 1.3% annualized rate from 1.6% initially, slightly better than the consensus estimate of 1.2%. It was led by softer consumer spending (mostly on durable goods) and a deeper decline in inventory investment that was partly offset by stronger state and local government spending and higher residential investment than previously estimated.

Pending home sales plunged 7.7% in April, much worse than the consensus estimate of -.4%. It was the first decline in three months and the most since February 2021, taking contract signing activity to a new record low since data started in January 2001. Pending sales fell across all four regions. It suggests that existing home sales will remain under downward pressure in the near term. High mortgage rates, rising home prices, and limited housing inventory continue to weigh on housing affordability and sales.