[MM_Member_Data name=’firstName’],

U.S. Stocks are slightly weaker as energy prices weaken and volatility picks up across the broader market.

Global Economy – European stocks moved higher Tuesday on the heels of Monday’s rally in U.S. markets where the S&P 500 climbed to a new all-time high.

Gains were limited as energy stocks moved lower with Aug WTI crude oil down at a 7-month low on concern that rising Libyan oil production will increase the global oil surplus.

According to people with knowledge of the matter, Libyan oil output is now at 900,000 bpd, the most in 4-years, after a deal with Wintershall AG enabled at least two more Libyan oil fields to resume production.

Chinese stocks closed slightly lower ahead of tomorrow’s decision by MSCI on whether it will include Chinese stocks in its benchmark share indexes.

Japan’s Nikkei Stock Index climbed to a 1-3/4 year high and garnered support from Monday’s rally in the S&P 500 to a new record high.

Japanese exporters also rallied on improved earnings prospects after USD/JPY rose to a 3-week high.

U.S. Economy – Same store sales year-on-year growth accelerated by 0.7 percentage points to a 2.8 percent rate in the June 17 week, posting the strongest year-on-year gain for the Redbook sample of retail stores since January 5, 2016.

Month-to-date same store sales versus the previous month were up 0.7 percent, increasing the recent pickup in this comparison following a series of negative readings to match the highest gain since the end of April.

Full month year-on-year same store sales were up 2.5 percent, back up to the strongest pace in at least a year set in the June 3 week.

June has been a very good month so far for the Redbook sample retailers, who are registering the best sales performance comparisons in 17 months following weakness in May, and the results point to a return of strength for ex-auto and ex-gas retail sales in June.

Market Sentiment – New York Fed President Dudley who said the U.S. economic expansion “has a long way to go.

Bonds traded higher after Federal Reserve Bank of Boston President Eric Rosengren earlier today said a low interest rate environment is likely to persist for some time to come.

The probability that the Federal Open Market Committee will increase its fed funds rate at the December 13 meeting is 46%, which compares to 50% yesterday.

Technically, I’m not seeing too much additional upside in bonds for several reasons. First, the long term trend is bearish, which coincides with the fundamentals and the fact that interest rates and bonds trade inverse to each other.

Second, the short term trend is now overbought to the upside according to the 10 day RSI, which is now in the 70th level.

Expect bonds to congest near current price level, lose directional bias and begin moving lower as economy continues to slowly improve and FED continues to raise rates over the near term.

Stock Market Analysis – Stocks are seeing more vulnerability as momentum continues to narrow, even as price continues trading higher.

Moreover, we are seeing retail make lower lows are remain below the 50 day line to the downside, even when recent FED data shows upside fundamentally.

If retail continues moving south, it will impact other major sectors such as consumer sentiment and quarterly GDP data, which relies heavily on retail sales and commerce.

Another major sector that I’ve focused on is the financial sector, since it’s now reaching overbought price levels. Financials are sensitive to price fluctuations since interst rates are moving higher and if financials begin trading lower it will impact banks and other sectors that are tightly correlated and will impact the Dow Jones and NYSE, which is overbought at this time.

Expect blue chips to begin dragging major indices lower and with increaed vulnerability in tech, it’s a matter of time till we see further selling pressure across the board.

Don’t expect major strength to enter the market in the near term.

I will update you tomorrow as usual.

Roger Scott