1. Bubble Warning: All the Signs ARE There
At Zulfiqar Research, we define a bubble as a period of rapid price increases, extreme expectations, soaring valuations, significant bullish sentiment, and a feeling that “nothing can go wrong.”
Since early April, the semiconductor and memory has shown all the signs of a bubble. In the Space sector also some names have become downright ridiculous.
A lot more attention is being given to the stock prices than to the underlying companies. The trade has become extremely crowded. Everyone knows valuations are expensive, but everyone also believes those valuations are justified.
Bubbles can last a long time—but they do eventually pop. And when they do, it can get very ugly.
This is not a recommendation to buy or sell. Rather, it is a warning.
Vertical moves look great on the way up, but they can be extremely dangerous when they reverse. Do not get run over.
2. When the Ducks Quack, Feed Them
“When the ducks quack, feed them.”
That’s exactly what’s happening in the stock market right now.
Have you noticed how many companies are rushing to raise money through the stock market? This is very common when stocks are doing well and investors are flush with cash. When investors aren’t too concerned about valuations, it’s a great time for companies to raise capital.
What’s interesting, however, is the sheer amount of money being raised.
That money has to come from somewhere.
Large capital raises like these often create selling pressure elsewhere in the market as investors reshuffle capital.
So, beware.
3. Jobs Report Countdown: Canada and U.S. in Focus
Tomorrow, we get job numbers from both Canada and the United States.
The U.S. JOLTS report suggests some improvement in the labor market. Meanwhile, ADP payroll numbers also point to better conditions. Let’s see what happens.
Current expectations remain around 85,000 jobs added in the U.S. during May.
For Canada, sentiment remains extremely weak.
Around 10,000 jobs are expected tomorrow, but Statistics Canada’s numbers can sometimes be surprisingly random.
That said, the trend is not looking good right now. Three of the past four months have shown job declines.
4. Oil, Copper, Gold & Silver: Key Levels to Watch
As headlines move all over the place, oil prices are reacting accordingly.
For chart watchers, WTI crude has significant support around $85-$86 per barrel.
Let’s see what happens.
There’s plenty of noise in the oil market right now, but if tensions between the United States and Iran ease and the Strait of Hormuz fully reopens, don’t be surprised to see oil prices pull back.
Meanwhile, copper remains in all-time-high territory, but it appears hesitant to move significantly higher at the moment.
As for gold and silver? Choppy at best.
5. Bitcoin at a Critical Support Zone
Bitcoin sold off yesterday and continued lower overnight. However, buyers have appeared this morning. Let’s see if $63,000 holds. This remains a major support level.
If it breaks, Bitcoin could fall toward $55,000 very quickly.
The U.S. Dollar Index is also holding up fairly well.
Meanwhile, the Canadian dollar (CAD) will be worth watching tomorrow, as the jobs report will be the final major data release before the Bank of Canada rate announcement.
It’s difficult to see the Bank of Canada hiking rates with a technical recession and a weak job market.