[MM_Member_Data name=’firstName’],

U.S. stock indexes were mixed Wednesday after another dive for energy stocks offset gains for health care and technology stocks.

Bond yields held steady, while stocks in mainland China got a small boost after they got the OK to join a widely followed index of emerging-market stocks.

Global Economy – European stocks are down as weakness in crude oil undercuts energy stocks. Aug WTI crude oil is down as production gains in Libya and the U.S. offset OPEC crude production cuts and boost the global oil glut.

Libya reported Tuesday that its crude production rose to a 4-year high of 902,000 bpd, while Baker Hughes reported that U.S. oil drillers have added rigs to oil fields for 22 consecutive weeks, the longest run in 30-years.

Crude oil prices slipped despite Tuesday’s afternoon’s data from API that showed U.S. crude supplies fell -2.72 million bbl last week.

The Japan Apr all-industry activity index rose +2.1% m/m, stronger than expectations of +1.6% m/m and the biggest increase in 8-years.

U.K. May public sector net borrowing rose +6.0 billion pounds, weaker than expectations of +7.0 billion pounds.

U.S. Economy – Mortgage applications in the week ended June 16 increased .6%, which compares to the 2.8% gain in the previous week.

Americans bought homes at a quicker pace in May, but the housing market may soon face turmoil because of a shortage of properties for sale and surging prices.

The National Association of Realtors says sales of existing homes edged up 1.1 percent last month to a seasonally adjusted annual rate of 5.62 million units. Sales have risen 2.7 percent over the past 12 months.

But homebuyers are facing greater financial and time pressures due to shrinking inventories. Sales listings have plummeted 8.4 percent over the past 12 months to 1.96 million. Homes are staying on the market for a median of just 27 days, the shortest period since the Realtors began tracking the measure in 2011.

The median sales price has risen 5.8 percent from a year ago to $252,800.

Market Sentiment – The probability that the Federal Open Market Committee will increase its fed funds rate at the December 13 meeting is 47%, which compares to 46% yesterday.

Technically, bonds are overbought according to 10 day RSI and sentiment. The long term trend is lower and next few weeks, I’m anticipating bonds to revert back down to the main trend.

Don’t expect extended volatility over the near term, unless Trump investigation heats up or other global uncertainties come to light in over the near term time frame.

Stock Market Analysis – I’m seeing major vulnerability in the blue chips in the near term and that tells me we can expect minor downside pressure in both the Dow and NYSE, which will spill over into the broader SP 500 index in the near term and create mild weakness.

If you look at the weakest sectors over the last 5 trading sessions you will see that the majority of the weakness is deeply concentrated in blue chips.

If you take a look at the Dow Jones average, which has approximately 97.5 correlation to the larger SP 500, you will notice that 10 day RSI is well into the 70th level and price appears to be stagnating.

I’m expecting Dow Jones to begin trading lower and violate the 50 day moving average to the downside. This would bring the blue chips in line with the recent downside corrective pressure in the tech sector and would bring some degree of balance back into the overal stock market.

What’s even more disturbing and something I want you to pay close attention to is the divergence between price and oscillator.

While most traders focus on RSI levels alone, the divergence between price and oscillator tells me that price moved up a bit too fast and is now ahead of itself.

Expect congestion or mild selling pressure, since tech is weaker and blue chips are not seeing institutional accumulation at this time.

Existing / New Position Update

Anticipate new set up next few days as several stocks are approaching high velocity pulback level to the downside.

SYMC showing some signs of life

MAR stagnating

AAPL seeing some interest.

I will go over a few stocks that are near the zone tomorrow and expect some limit orders before the end of the week.

I will update you tomorrow as uusal.

Roger Scott
Head Trader
Market Geeks