Will the Bulls Buy the Dip?

*Analyzing the markets with Richie Naso, a Wall Street veteran of over 40 years and former member of the NYSE.

• DJIA 52-wk: +18.95% | YTD: +5.83% | Wkly: -0.32%
• S&P 500 52-wk: +23.05% | YTD: +7.86% | Wkly: -2.59%
• NASDAQ 52-wk: +31.64% | YTD: +10.62% | Wkly: -4.68%
• Russell 2000 | Wkly: ~-2.9% | Selloff Accelerated Friday On Strong Jobs Data; Yields Surged
  

HYG — Junk Bond Watch

HYG finished the week modestly lower as rising Treasury yields and renewed concerns about inflation pressured the high-yield credit market.

Why it matters for stocks:

• When HYG is strong, it suggests investors are comfortable taking risk and credit markets remain supportive of equities.
• When HYG weakens, it often signals growing concern about economic growth, rising default risk, tighter financial conditions, or declining liquidity.

The S&P 500

Fell more than 2.6% on Friday, its worst one-day drop since October. This ended a run of nine consecutive weekly gains, its longest streak since the end of 2023.

The Nasdaq

The Nasdaq fell approximately 4.7% last week, significantly underperforming the broader market as rising Treasury yields pressured growth-stock valuations. Technology and semiconductor shares led the decline, with investors reassessing risk following stronger-than-expected economic data and a reduced likelihood of near-term Federal Reserve rate cuts. Despite the sharp pullback, the longer-term uptrend remains intact, although the index is becoming increasingly sensitive to movements in interest rates and signs of slowing market breadth.

Employment Report

While the economy continues to create jobs at a healthy pace, the stronger-than-expected employment report was not necessarily good news for stocks. The data pushed Treasury yields higher and reduced expectations for near-term Federal Reserve rate cuts. As a result, investors sold interest-rate-sensitive sectors, particularly technology and small-cap stocks. Going forward, the market will remain highly focused on labor market data, as employment trends continue to play a major role in shaping Fed policy and interest-rate expectations.

Strong jobs → Higher yields → Higher borrowing costs → Lower stock valuations

Citi’s Bear Market Indicator Hits Post-GFC Peak

ℹAttribution: The following section summarises analysis from Seeking Alpha / Citi Research. Included for informational and educational purposes only. Please verify the exact article title, author, and date before publication.

Citi’s proprietary Bear Market Checklist has climbed to its highest level since the 2008 financial crisis, flashing warning signs as global equities hover around record territory.

The BMC has climbed to 10 out of 18 flags globally. The U.S. market (SPY) shows even more elevated conditions at 11.5 flags, while Europe (VGK) remains more subdued at 5 flags.

Despite the warning signs, Citi Research analysts maintain a constructive outlook on equities through year-end, noting the indicator does not yet signal “overexuberance.” Previous bear markets saw significantly higher readings, with the BMC reaching 17.5 flags before the 2000 dot-com crash and 13 flags ahead of the financial crisis.

Several factors are driving the uptick in flags, including robust global earnings growth, increased fund flows and elevated capital expenditure — particularly in artificial intelligence (AIQ). A surge in IPO activity has also pushed equity issuance into cautionary territory, though tight credit spreads continue to provide a more positive signal.

However, Citi warns that once the checklist enters double digits, flags have historically tended to accumulate more rapidly. Should more indicators turn red, analysts cautioned that market dips “should not necessarily be bought.”

Gold Stocks Are in a Bear Market. The Case for Buying.

ℹAttribution: The following section summarises reporting from Barron’s. Included for informational and educational purposes only. Please verify the exact article title, author, and date before publication.

KEY POINTS

• Gold mining stocks, represented by the VanEck Gold Miners ETF, have fallen 24% from their February high, outpacing gold’s 13% drop.
• Gold has found consistent buyer support around $4,500 per ounce, with analysts noting a long-term uptrend and central bank purchases.
• J.P. Morgan forecasts gold to reach $5,245 per ounce by 2027, suggesting strong returns for gold stocks like Equinox Gold.

Gold stocks are way down, and anyone seeking opportunities may want to give them a look.

The VanEck Gold Miners exchange-traded fund — home to some of the largest miners, such as Newmont and Barrick Mining — has slid 24% from its record high hit in late February.

These stocks follow the price of gold. The precious metal tumbled 13% over that same stretch after enjoying a multiyear rally that included gains of more than 30% in the past year. The stocks are so-called leveraged plays on the commodity — when the price of the commodity falls, the stocks fall harder. That’s because miners have many fixed costs, so lower gold prices squeeze their profit margins, if all else is constant.

The good news: this dynamic works in reverse, so if the price of gold rebounds, the mining stocks typically bounce back quickly. And a gold price rebound looks very much in the cards, making most gold stocks, if not all, appear attractive.

Gold has dropped from $5,247 per ounce near the end of February to just over $4,500 now. Buyers have consistently stepped in around $4,500 to prop up the price in the past several trading days. If, for whatever reason, gold breaks below that level, the next key support level is $4,376, where buyers aggressively came in at the end of March, causing a quick pop. These are signals that gold has potential to resume its long-term rally.

“We continue to respect gold’s longer-term uptrend and are monitoring for confirmation that support is holding.” — Adam Turnquist, Chief Technical Strategist, LPL Financial

That long-term uptrend has support from central banks, which grew their gold purchases by 17% annually between 2021 and last year, according to the World Gold Council. As they continue to diversify their reserves away from the U.S. dollar, gold can climb. That partly underpins why J.P. Morgan strategists see the metal reaching $5,245 an ounce by 2027, for a roughly 16% gain.

That means gold stocks — given their outsize responses to the commodity’s price moves — have the potential for returns above 15% over that period. Sure, an investor can buy the gold ETF to capture the upside, but anyone that has particularly high conviction that gold can rally would want to buy the riskier gold miners, since they climb most when gold’s price rises. They’re often the smaller ones.

We identified mining companies that saw at least 90% of their first quarter revenue from gold sales and that have outperformed the gold mining ETF in the past year. They include AngloGold Ashanti (AU), Kinross Gold (KGC), and Equinox Gold (EQX). All three stocks are up more than 70% in the past year, versus around a 61% rise for the big gold mining ETF.

Another name to consider that’s essentially an exception to the list is Orla Mining (OLA), which is set to merge with Equinox in the third quarter. Orla stock has badly underperformed the industry in the past year, but it now trades extremely closely in percentage-change terms to Equinox. When gold rose just over 1% on May 29, for instance, Equinox and Orla both advanced 7.6%.

According to the merger agreement, shareholders receive one Equinox share for every Orla share plus a negligible amount of cash, making the transaction almost a purely one-for-one all-stock deal. This means when the deal closes, one Orla share will be worth almost exactly the price of an Equinox share, which is why they’re trading in line with each other. So anyone who is bullish on Equinox is almost certainly bullish on Orla.

Give these stocks a look. Anyone who prefers to stomach a little less risk can just buy the ETF.

What I’ll Be Focused On This Week

WATCH LIST — WEEK OF JUNE 8, 2026

• Wednesday
  PCE report
  
• Thursday
  SpaceX is expected to be priced at approximately $135 per share, valuing the company at roughly $1.8 trillion
  
• Friday
  SpaceX begins trading on NASDAQ

Richie’s Take

The market appears to be approaching a near-term inflection point. One of the developments that concerns me is the speculative enthusiasm surrounding SpaceX and the broader space sector. History shows that when investors begin aggressively chasing highly speculative themes, particularly among smaller-cap companies with limited earnings visibility, it can often signal increasing complacency and excessive risk-taking. While SpaceX itself is a world-class company, the excitement surrounding a potential IPO or future liquidity event has spilled over into a number of lower-quality names that appear to be trading more on narrative than fundamentals.

From a market perspective, this type of behavior is often seen in the later stages of a rally, when investors become less focused on valuation and more focused on momentum. If interest rates continue to rise and liquidity conditions tighten, these speculative areas could be among the first to come under pressure.

Should the SpaceX trade begin to unwind, it may not have a significant direct impact on the major indexes. However, it could serve as an important signal that investor risk appetite is beginning to fade. Combined with recent weakness in the Russell 2000, softness in HYG, and rising Treasury yields, a reversal in speculative space-related stocks would reinforce the view that the market’s underlying tone is becoming increasingly fragile.

In short, I am less concerned about SpaceX itself and more concerned about what the enthusiasm surrounding it says about investor behavior. When speculation begins to outpace fundamentals, it is often prudent to become more selective and more defensive.

I continue to proceed with extreme caution, especially earlier in the week.

– Richie

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