Cabrera Capital Daily Game Plan

Friday June 18, 2021                                                        Trading
Desk: (312) 236-8907

TODAY’S GAME PLAN:  from
the trading desk, this is not research

DATA/HEADLINES  
Quarterly Rebalance Day

QUAD WITCHING is today’s main event

TODAY’S HIGHLIGHTS:   

• Kim Jong Un seemed to offer an opening for talks with Joe Biden 
  
• Most government workers will be granted paid time off today for Juneteenth, the June 19 federal holiday signed into law yesterday 
  
• Iran’s presidential election takes place today
• Fed’s Bullard: Fed has eye on equity market valuations, but have different opinions
  
• Six states will allow student players to profit from the use of their likeness starting on July 1
  

Global equities were relatively quiet this morning, with some volatility possible later due to quad-witching when options and futures on indexes
and equities expire. This week’s aggressive repricing in US Treasuries is going global, with long-end borrowing costs from Germany to the U.K. sliding as traders brace for central banks to subdue fears over rising inflation.  The European Union added the US
to its “white list” meaning Americans can travel to the region without facing restrictions on arrival. British travelers remain mostly grounded amid a surge in infections from the delta variant of Covid-19. China is hoping for the U.S. to remove punitive tariffs
on its goods, with a commerce ministry group arguing it’s in America’s best interest to do so as worries over inflation mount.                                     

EQUITIES: 
 

US equity indices slide after the Fed’s Bullard admits they were “tilted more hawkish” and that the taper discussion is fully open.  Equity markets
are fully focused on quad witching today as the macro calendar and news flow remains light. US equity index futures drifted as investors unwound some of this year’s dominant reflation trades. Futures on the Nasdaq 100 outperform and are slightly higher after
the underlying gauge climbed to a record high yesterday, bolstered by gains in Apple, Nvidia and Microsoft. A bipartisan group of US senators on Thursday proposed a 25% tax credit for investments in semiconductor manufacturing as Congress works to increase
US chip production.

E-mini S&P futures -0.4%, Nasdaq -0.2%, Russell 2000 futures -0.9%, Dow futures are -0.55%. SPX has key closing support around its 50 day mvg
avg of 4180. 4230 is s/t key resistance in ES (.618 retrace).

Adobe (ADBE) shares climb 2.7% in premarket trading as analysts raise their share price targets after strong quarterly results. Athira Pharma
(ATHA) slumps 30% after the drug developer placed its CEO on temporary leave amid a review related to doctoral research. CAI International (CAI) shares jump 45% after Mitsubishi HC Capital agreed to buy the container leasing company. Smith & Wesson (SWB) shares
climb 5.4% after the gun maker reported what Cowen calls a “blowout” fourth quarter.

Information Technology led the Nasdaq Index higher by 1.25% yesterday, putting QQQ vs SPY nearly back to the 200 day moving average (pivotal
resistance). A fresh bout of rotation from cyclical stocks pushed the tech-heavy gauge to another record.

Some rotation back into growth relative to value after holdiing key long term technical support at the 200 week moving average.

The financial sector was the worst performer yesterday, down nearly 3%. The financial ETF (XLF) has underperformed the S&P500 by approximately
7% from June 3. Bank ETF (KBWB) is holding a short term negative tone below its
50dma. 

European shares dip, led lower by energy, banks and insurance companies. U.K. shares underperform on a regional basis following an increase in
new coronavirus cases, with Spain’s IBEX 35 also falling sharply (-1.5%). Germany’s DAX index fell 0.9% as data showed a bigger-than-expected jump in May producer prices.  Danish pharmaceutical company Orphazyme sank 60% after saying it had failed to win support
from the US FDA for its arimoclomol drug.  Tesco, Britain’s biggest retailer, fell 3% as it reported a sharp slowdown in quarterly underlying UK sales growth. Car dealer Inchcape topped the STOXX 600 after raising its annual profit forecast. FTSE 100 -1.1%,
Stoxx 600 -0.7%, Bank sector -2.5%, Energy -2.25%, Autos -1.35%, Healthcare +0.1%.

Asian stocks fell and are on track for their biggest weekly drop in more than a month, as the selling of financial and other cyclical shares
overshadowed buying in growth stocks. Financial-sector stocks dropped and were the biggest drags on the MSCI Asia Pacific Index, while health-care, consumer discretionary and communications service shares advanced. Toyota Motor was the biggest contributor
to the decline, down 3.9%. Indonesia’s Jakarta Composite Index was the biggest decliner among the region’s key equity gauges, -1%, while China’s small-cap ChiNext index was the best performer (+1.6%). The Shanghai Composite was flat.  Hong Kong stocks ended
0.85% higher on the back of gains in tech and healthcare firms, with the Hang Seng healthcare index climbing 3.3%. The Bank of Japan left its 10-year bond yield target unchanged at about 0% after concluding its two-day meeting today.  The BOJ said it will
extend its Covid-era lending program beyond September.

FIXED INCOME: 
                                       

Treasuries are higher after erasing Asia-session losses, with the curve continuing to flatten. Position adjustments and
steepener unwinds continue to dominate price action in global rates as next week’s front-end and belly auctions come into view. Shorter-term indicators show that markets are back in sync with the Fed’s insistence that inflation will be transitory, with two-year
breakeven rates sliding back to March levels. 10-year yield trades around 1.49%.  Looking ahead, Federal Reserve Chair Jerome Powell testifies on Capitol Hill next Tuesday.  

10 year yield held below the
50dma
yesterday and we look for the 200dma
in 30 year yield to be key support

METALS: 
                  

Gold rose 1% as a pause in the dollar’s rally helped bullion claw back some ground from a sharp slide in the previous sessions
driven by the US Federal Reserve’s hawkish tilt.  Silver rose 1.8% but was down more than 5% for the week. Copper headed for its worst week since the start of the pandemic as the Federal Reserve’s hawkish turn and fresh interventions to cool Chinese commodities
markets weigh on the outlook for demand. Prices have slumped nearly 8% this week, extending a retreat from last month’s all-time high.

ENERGY:                            

Oil fell for a third day. An advance in the dollar this week has made commodities that are priced in the US currency more
expensive, driving declines across the complex. Oil prices also fell after Britain on Thursday reported its biggest daily rise in new cases of COVID-19 since mid-February. The oil market may be more concerned about the election in Iran today.  Iranians vote
in a presidential election, with the result likely to have a bearing on the chances of a rapid return of the country’s crude to global markets. Brent remains positive short term above $71.60.         

CURRENCIES:  

Gains among Group-of-10 currencies are led by the euro overnight. The pound slipped 0.2%, weighed down by a surge in virus
cases, weak retail sales data and a hawkish Federal Reserve. GBP/USD has slumped 1.4% this week, headed for its biggest decline this year, reflecting the dollar’s broad comeback since the Fed meeting. The US Dollar Index is slightly higher after having its
largest two-day advance since March 2020 and is back above its 200 day moving average. AUDUSD leads losses in G-10, down 0.3%.

Bitcoin has continued to show a lackluster performance, yet again trading in the $37,000-$38,000 range today. But there
are a few positives to consider. Spanish banking giant BBVA’s Swiss entity, BBVA Switzerland, said it will start offering bitcoin trading and custody services from Monday, June 21. While the bank currently only supports bitcoin, it said the aim is to also
offer other cryptocurrencies in the future. The Cambridge Centre for Alternative Finance estimates that 76% of all miners use renewable energies as part of their mix. The National Republican Congressional Committee, the financing arm for House Republicans,
will become the first national party committee to begin accepting cryptocurrency for campaign contributions.

Bitcoin as of 7:20ET – futures continue to hold above the 200dma…

TECHNICAL LEVELS: 
(futures)    

Colors within the report:
Green
is always the 200 period (day, week). Red is always 21,
Blue = 50,
Brown =
100  *Stars have added importance

UPGRADES:

• Alaska Air (ALK) raised to outperform at Wolfe
• Arco Platform (ARCE) raised to outperform at Itau BBA; PT $47
• BancorpSouth Bank (BXS) raised to buy at DA Davidson; PT $34
• Biogen (BIIB) raised to overweight at Piper Sandler; PT $450
• Crinetics Pharma (CRNX) raised to overweight at JPMorgan; PT $28
• Delta Air Lines (DAL) raised to outperform at Wolfe
• Lennar (LEN) raised to overweight at JPMorgan; PT $141
• Occidental (OXY) raised to overweight at Morgan Stanley; PT $40
• Orion Engineered (OEC) raised to overweight at JPMorgan; PT $23
• Pembina Pipeline (PPL CN) raised to outperform at CIBC; PT C$47
• Saia (SAIA) raised to overweight at Wells Fargo; PT $257
• Turquoise Hill (TRQ CN) raised to outperform at Macquarie; PT C$25

DOWNGRADES:

• Boralex (BLX CN) cut to sector perform at Peters & Co; PT C$45
• Cimarex (XEC) cut to equal-weight at Morgan Stanley; PT $68
• Compass Minerals (CMP) cut to underweight at JPMorgan; PT $62
• CuriosityStream (CURI) cut to underperform at BofA
• Devon (DVN) cut to equal-weight at Morgan Stanley; PT $32
• EQT Corp (EQT) cut to equal-weight at Morgan Stanley; PT $22
• Everest Re (RE) cut to neutral at Citi
• New Oriental Education ADRs (EDU) cut to hold at HSBC; PT $9.20
• Shockwave Medical (SWAV) cut to equal-weight at Wells Fargo; PT $189
• Tal Education ADRs (TAL) cut to hold at HSBC; PT $25

INITIATIONS:

• Abiomed (ABMD) rated new buy at Deutsche Bank; PT $360
• Argenx ADRs (ARGX BB) rated new buy at UBS; PT $390
• Ashland Global (ASH) rated new buy at Stifel; PT $118
• CI Financial (CIX CN) rated new outperform at KBW; PT C$28
• Cardlytics (CDLX) rated new buy at Needham; PT $135
• Cerevel Therapeutics (CERE) rated new overweight at Morgan Stanley
• Churchill Downs (CHDN) rated new outperform at Macquarie; PT $254
• Cirrus Logic (CRUS) rated new buy at Loop Capital; PT $111
• Cloudflare (NET) rated new buy at William O’Neil
• CoreCivic (CXW) rated new neutral at Wedbush; PT $10.85
• Gold Standard Ventures (GSV CN) rated new outperform at National Bank

David Wienke

Cabrera Capital Markets, LLC