From Treasure to Trash

While a "June Swoon" still may materialize in equities, we know it was not meant to be for at least the first half of this month.

After a demoralizing May for bulls, June has proven to be a rebirth of sorts, with various M&A deals emerging to boost healthcare, biotech, and software growth stocks when they needed it most, among other sectors. Select retail and some strong restaurant stocks have also dazzled, while recent IPOs like BYND ZM imply that underlying risk appetite remains healthy, despite all of the market's trials and tribulations in May. 

Naturally, tomorrow's FOMC ought to give even the most steadfast bull at least some pause given the sharp rally we are seeing this morning as well as in general since June began. But that may be just it--We may be in a cycle where the pain trade truly is higher as fund managers and many individual traders simply decided to call it a summer back in May and walk away from the screens for at least a few months. 

If that is truly the case, and quite a few sentiment/allocation surveys indicate as much, then we may be in for a further surprise rally barring a nasty curveball from the Fed tomorrow which throws equities for a loop. 

Another big story this morning is the action in small caps, with IWM (daily chart, below, updated) threatening to close back over its 200-day moving average (yellow line) for the first time since May 10th. As we know, the failure to hold above its 200-day back then had rough broad market consequences for the rest of May. 

Finally, the solar sector is running nicely on a big upgrade this morning. Most solar charts were in good shape beforehand, too, a real plus as we see the likes of SPWR shoot the moon. We are watching a coiled up name like FSLR now to follow suit.