U.S. markets opened Tuesday with modest gains and traded in a narrow range throughout the session.
The volatility the market has experienced over the past several days was not as evident and the economic news had little effect on the major indexes.
The Dow gained 0.1% following the push to 24,384 but failed to hold its 200-day moving average on the rebound.
The S&P 500 climbed 0.2% after reaching an intraday peak of 2,732 but failing near-term resistance at 2,750.
The Nasdaq rose 0.4% after testing a high of 7,597 with near-term resistance at 7,600 holding.
The Russell 2000 was up 0.7% on the intraday run to 1,672 with short-term resistance at 1,675 holding into the close.
Energy and Consumer Discretionary showed the most sector strength after rising 1.3% and 0.7%, respectively.
Consumer Staples declined 0.4% while Financials and Health Care fell 0.3% to round out sector laggards.
Global Economy – European markets were mostly quiet and rather calm after finishing mixed for the session.
UK’s FTSE 100 gained 0.4% and the Stoxx 600 Europe was up a tenth-point, or 0.02%. Germany’s DAX 30 slipped 0.3% and France’s CAC 40 dipped 0.1%. The Belgium20 was off nearly a point, or 0.02%.
ECB Governing Council member Hansson said trade war risks are large and scary. He added global supply chains are very fragile and when they get disrupted then consequences can be rather big.
He also said the ECB would remain rather expansionary even after the end of QE net purchases in December.
Asian markets were mostly lower with Japan’s Nikkei bucking the trend after advancing roughly 4 points, or 0.02%.
China’s Shanghai was down 0.5% while Hong Kong’s Hang Seng and South Korea’s Kospi fell 0.3%. Australia’s S&P/ASX 200 gave back 0.2%.
Japan May PPI services rose 1% year-over-year, matching expectations.
U.S. weekly chain store sales jumped 3% in the week ending June 23rd, more than double the 1.4% clip the week before.
On a 12-month basis, sales edged up to a 3.4% year-over-year pace versus 3.3% previously.
The S&P Corelogic Case-Shiller home price index rose 0.80% to 210.17 in April for the 20-City reading. This brought the 12-month pace to 6.56% year-over-year.
The 10-city Composite rose 0.61% to 223.70 and the annual rate was at 6.23% year-over-year in April.
June Consumer Confidence came in at 126.4, below expectations of 128.1.
The Richmond Fed Manufacturing Index rose 4 points to 20, topping estimates for a print of 16.
Market Sentiment – Dallas Fed Robert Kaplan expects 2.75% GDP growth for this year partly due to the recent tax cuts, but expects growth to slow next year.
He said the short end of the yield curve is responding to Fed actions, and reflect expectations that future U.S. growth will be sluggish.
On trade and tariffs, Kaplan said tariffs can erode margins, or the increased costs are passed on to customers in the form of higher prices.
He added it’s too early to say whether the tariffs are good or bad for the overall economy and continues to share the view that trade with neighbor Mexico helps boost U.S. jobs and competitiveness.
Atlanta Fed Raphael Bostic said the Fed is trying to keep the economy on a stable, sustainable path and that the Fed is trying to avoid some of the excesses seen in the past. On trade, he noted it’s causing uncertainties, but it’s too soon to pick winners.
Bostic acknowledged the trade uncertainties are making the Fed’s job a lot harder and said steel tariffs affect only a relatively small part of the economy.
However, auto tariffs could ripple through and potentially have a larger effect on the economy. He also added breaking up NAFTA would raise questions about supply chains, while costs would be higher, and disruptions from a trade war would be painful.
The iShares 20+ Year Treasury Bond ETF (TLT) traded to a high of $121.03 with resistance $121-$121.25 and the 200-day moving average.
Continued closes above the latter would be a bullish development. Support remains at $120.25-$119.75.
Market Analysis – The PowerShares QQQ (QQQ) snapped a 3-session slide after trading to a high of $173.06. Near-term support at $173-$173.50 held with a close back above $174 being a slightly bullish signal.
Short-term support is at $171-$170.50 with a close below $170 likely signaling additional weakness.
RSI has been in a downtrend but is trying to clear resistance at 50 with a close back above this level being a slightly bullish sign. Support is at 45-40.
The Energy Select Sector Spider (XLE) tested a high of $74.86 to clear lower resistance at $74.50-$75. The 50-day moving average is in a solid uptrend with a close above the latter being a slightly bullish development for higher highs.
Support is at $73.50-$73 with a close back below the latter signaling additional weakness towards the $72 area.
RSI is approaching resistance is at 50 with a close above this level signaling additional strength. Support is at 45-40.
New Position Update
Initiated bull put spread on ADI today. Expect price to trade higher over the near term if volatility remains steady.
I want to turn position into iron condor if price begins trading higher next 2 sessions to take advantage of weekend decay.
Looking at Healthcare sector at this time. Outperforming all other sectors and may be prime for credit spreads.
Should have another position on before end of week.