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Tuesday, July 9, 2019

Market Action

U.S. markets closed mostly higher on Tuesday after spending much of the session underwater and showing caution ahead of Fed Chairman Jerome Powell's testimony on Wednesday and Thursday. Powell didn't comment on policy or the economy in his video recorded welcome remarks at a Boston Fed conference.

Developing trade talks between the U.S. and China helped sentiment but volatility remains slightly elevated after closing slightly higher for the 3rd-straight session.

The Nasdaq rose 0.5% after trading to an intraday high of 8,146. Lower resistance at 8,150-8,200 held with the late April all-time high at 8,176.

The S&P 500 nudged up 0.1% after testing a high of 2,981 ahead of the closing bell. Lower resistance at 2,980-3,000 held with last week’s all-time high at 2,995.

The Russell 2000 was higher by 0.1% after closing at its session peak of 1,562. Near-term resistance is at 1,570-1,575 with a close above the latter getting 1,600 back in focus.

The Dow extended its losing streak to 3-straight sessions after dipping 0.1% while testing a morning low 26,665. Near-term and upper support at 26,750-26,500 held for the 2nd-straight session with risk towards 26,250-26,000 and the 50-day moving average on a move below the latter.

Communication Services and Real Estate paced sector leaders with gains of 0.6% and 0.5%.

Materials and Consumer Staples led sector laggards after falling 1% and 0.6%, respectively.

Earnings

Global Economy

European markets settled lower across the board after Turkey proceeded with a deal for Russian missile systems despite U.S. and NATO warnings.

Germany's DAX 30 dropped 0.9% and the Belgium20 declined 0.6%. The Stoxx 600 was off 0.5% and France’s CAC 40 was down 0.3%. UK's FTSE 100 dipped 0.2%.

UK retailers average sales growth weakened to 0.6% in the 12 months to June, the slowest increase since records began in 1995.

Asian markets closed mostly lower with Japan’s Nikkei bucking the trend after edging up 0.1%.

Hong Kong's Hang Seng sank 0.8% and South Korea’s Kospi gave back 0.6%. China's Shanghai slipped 0.2% and Australia’s S&P/ASX 200 was lower by 0.1%.

U.S. Economy

NFIB Small Business Optimism Index declined 1.6% to 103.3 in June, erasing May's 1.4% increase to 105, and snapping 4-straight months of gains. Plans to hire declined to 19% from 21% while expectations of higher selling prices, and plans to increase inventories, both increased, due to tariff pressures. Expectations for a better economy were unchanged, while expectations for higher sales declines. Expectations for a positive earnings trend also weakened to -7% from -1%, and has been in negative territory since September.

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Redbook Store Sales were up 6.2% for the year in the week ending July 6th.

U.S. chain store sales slipped 0.1%, following the 0.6% decline in prior. However, the 12-month pace picked up slightly to 2.5% year-over-year versus 1.9%, previously.

The JOLTS report showed job openings fell 49,000 to 7,323,000 in May, versus forecasts of 7,400,000. The JOLTS rate slipped to 4.6% versus 4.7% in April. Quitters declined 91,000 to 3,425,000 following April's 55,000 increase to 3,516,000. The quit rate was steady at the cycle high of 2.3%. Hirings dropped 266,000 to 5,725,000 in May after adding 294,000 to 5,991,000.

Market Sentiment

Fed Chairman Powell stuck to the topic of stress tests, where he said the Fed is strongly committed to stress testing as a cornerstone of the bank supervisory and financial stability missions. He added that the tests also need to evolve.

The iShares 20+ Year Treasury Bond ETF (TLT) was lower following the morning backtest to $132.16. Lower support at $132.50-$132 held. Backup help is at $131.50 with a move below this level opening up risk towards $130.50-$130.

Near-term resistance remains at $133-$133.50.

Volatility Index

The S&P 500 Volatility Index ($VIX) was up for the 3rd-straight session after trading to an intraday high of 14.71. Upper resistance at 14-14.50 was breached but held on the close above the former. A move above 15 opens up risk towards 15.50-16 and the 50-day moving average.

Support remains at 13.50-13.

Market Analysis

The S&P 400 Mid Cap Index ($MID) fell for the 2-straight session after testing an intraday low of 1,936. Near-term and prior support from earlier this month at 1,940 was breached but held. A move below the 1,935 level would be an ongoing bearish development with risk towards 1,925-1,900 and the 50-day moving average

Near-term and lowered resistance is at 1,950-1,960. Continued closes back above the latter being a more bullish development and signal a return of momentum.

RSI is in a downtrend with support at 55-50. A move below the latter would be a bearish development and signal additional weakness towards 45-40. Resistance is at 60.

Sector

The Financial Select Sector Spiders (XLF) settled higher for the 3rd time in 4 sessions despite the intraday pullback to $27.81. Upper support at $28-$27.75 was breached but held. A close below the latter could lead to further weakness towards $27.50-$27.25 and the 50-day moving average.

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Near-term resistance at $28.25-$28.50 held on the late day rebound to $28.12. Continued closes above the latter would be a renewed bullish signal for a run towards $28.75-$29 and fresh 52-week peaks.

RSI is flatlining with support 60. A close below this level opens up risk towards 55-50 with the latter representing support throughout much of June. Resistance is at 65-70 with a move above the latter signal a return of strength with upside potential towards 75 and late April high.

All the best,

Roger Scott
WealthPress