[MM_Member_Data name=’firstName’],

U.S. markets wrapped up a strong week following Friday’s second half breakout to fresh all-time highs and prior resistance levels from early June.

The Financial sector lagged on mixed earnings results while the Transports continued their run to record highs. The beginnings of a summer rally appears to be in play and will be tested as 2Q earnings season starts to heat up.

Global Economy –European markets largely finished lower on Friday, with Financial stocks slipping after their U.S. earnings season got underway.

Energy and Mining stocks traded higher and helped limit the losses. The markets in Germany, France, Spain, Italy and the U.K. closed slightly in the red while the Stoxx Europe 600 ended higher led by the Commodity stocks.

While the major U.S. banks posted higher-than-anticipated profit, weaker trading revenue fell shy of expectations.

This raised questions about what European lenders will say about the lower revenues when they begin releasing financial results in the coming weeks.

The U.K. published its first draft legislation on Brexit that is designed to revoke a 1972 law that made European Union (EU) law applicable in the country. The bill marks the initial step in what is expected to be a rough battle in negotiating the U.K.’s exit from the EU.

U.S. Economy-U.S. CPI was flat in June, with the core up 0.1%, as analysts forecast, following a 0.1% dip in the May headline, and a 0.1% gain in the ex-food and energy component.

Compared to last June, overall prices slowed to a 1.6% year-over-year pace from 1.9% y/y, while the core rate was steady at 1.7% y/y.

U.S. retail sales slipped 0.2% in June, with the ex-auto component also declining 0.2%. The 0.3% May decline was revised to -0.1%, while the -0.3% for the ex-auto figure was not changed.

U.S. industrial production rose 0.4% in June, pulling capacity up to 76.6%. The flat reading on May production was revised up to 0.1%, with the capacity figure nudged down to 76.4% from 76.6% previously.

The 0.4% U.S. June industrial production rise beat estimates to leave a fifth consecutive gain from weather-depressed winter readings, though analysts saw downward revisions that left a slightly weaker than expected report.

The University of Michigan consumer confidence index fell another 2 points to 93.1 in the preliminary reading for July.

May Business Inventories up 0.3% versus consensus of 0.3% for the month.

U.S. consumer sentiment slipped another 2 points to 93.1 in the preliminary read from the University of Michigan survey, after falling 2 points to 95.1 in June.

The index has ranged from 93.1 to 98.5 so far this year with the former the lowest since October, and the latter the best since January 2004.

Market Sentiment –Fed’s Robert Kaplan said some of the weakness in inflation is transitory, some is not, noting that some technical disruptions are helping soften pricing power.

He went on to say he expects wage pressures to be picking up in the months ahead with the U.S. close to full employment.

The Fed voter also believes the balance sheet unwind will have a limited impact on the markets and could happen as early as September.

The FOMC will likely take a pause from hiking rates at the upcoming July 25, 26 meeting and there is chatter they could announce QT, quantitative tightening while beginning it in October.

Wall Street had expected the announcement in September, to begin in October, and suspect that might be the case after the recent Fed reports, with the next rate increase coming in December.

The iShares 20+ Year Treasury Bond ETF (TLT) traded to a high of $124.16 but was unable to hold its 50-day moving average and upper resistance at $123.75-$124. Support is at $122-$121.75 and the 100/200-day moving averages if $123 fails to hold over the near-term.

 

 

Market Analysis-The Spiders S&P 500 (SPY) gained 0.5% on Friday to settle at $245.56. SPY slipped 8 cents to $244.31 at the start of trading with rising support at $245-$244.50 holding.

There is additional help at $242.50 followed by $241 and the 50-day moving average. The surge to nearly $296 afterwards and all-time high gets fresh resistance at $247.50-$250 in play.

 

 

 

The percentage of S&P 500 stocks trading above their 50-day moving average jumped nearly 10% on Friday and is now at 69.50. Continued closes above the 70 level could lead to 74-74.50 and the early June highs.

The June 14th peak reached 74.25 followed by a run to 73.80 five days later. While this could signal a short-term market peak, if tested, it is important to remember January’s high cleared 82.

Continued closes above the June highs could get 78-80 in the mix at some point this month, or next.

Existing / New Position Update

SYMC cooled off – at least for now. Still have a few days before expiration and implied volatility is increasing.

AAPL seeing more accumulation from institutional volume.

MAR began attracting volume and volatility started increasing once again.

Will have new positions next week.

All the best,
Roger Scott