[MM_Member_Data name=’firstName’],

The U.S. markets traded mostly higher for the second-straight session as Tech continued to rebound. The small-caps and consumer staples showed some weakness and the overall gains were limited as investors await the start of 2Q earnings season. While there are a number of key announcements throughout the week, Friday’s earnings reports from four major U.S. banks are the most anticipated. 

Global Economy – European markets closed higher, helped in part by stronger-than-expected German May exports. The gains came after Germany’s statistics office Destatis reported the country’s exports surged 14.1% in May compared with a year ago, on strong demand from outside the European Union.

Minutes from the European Central Bank’s meeting in June showed policy makers, talked about whether to drop a pledge to accelerate its bond-buying program. However, they decided not to abandon the language, in part because inflation still appeared vulnerable to weakening.

China June CPI rose +1.5% year-over-year, unchanged from May and weaker than expectations for a rise of +1.6%. June PPI rose +5.5% year-over-year, unchanged from May and matching expectations.

The Eurozone July Sentix investor confidence fell -0.1 to 28.3, stronger than expectations of -0.3 to 28.1.

The German May trade balance widened to a surplus of 22.0 billion euros, higher than expectations of 18.7 billion euros. May exports rose +1.4% month-over-month, stronger than expectations of +0.3%. May imports rose +1.2%, stronger than expectations for a gain of +0.3%.

U.S. Economy – The U.S. Fed’s Labor Market Conditions index rose 1.5% in June following an upwardly revised 3.3% May increase (previously 2.3%) and a 3.8% April jump (revised up from 3.7%). This represented the 13th straight monthly gain.

The index is heavily weighted by the unemployment rate, and the rise to 4.357% from 4.294% in Friday’s jobs report was a factor behind the gain.

The LMCI, a favorite of Janet Yellen, is a composite indicator comprised of 19 already released variables and corroborates the view of a solid labor market.

May Consumer Credit was $18.4 billion versus consensus of $14.3 billion for the month.

Market Sentiment – Federal Reserve Vice Chairman Stanley Fischer said in a speech on Friday that in recent years, “the contribution to labor productivity growth from investment has declined.

The iShares 20+ Year Treasury Bond ETF (TLT) is battling resistance at $123.50-$123.75 and the 50-day moving average after testing a high of $123.11 intraday.

 

Support is at $122.25-$122 and the 200-day moving average. A move below $121.75-$121.50 and the 100-day moving average would be a bearish development. The golden cross that formed in mid-June is typically a bullish sign. The downside pressure could start to ease on a move back above $124.50-$125.

Market Analysis – The continued rebound in Tech and closes above 6,150 have been bullish signs over the past few sessions. The Nasdaq has held this level in three of the past four sessions including today’s close above the 50-day moving average.

 

Upper resistance at 6,175-6,200 was tested on the push to 6,191 into the closing bell. Continued closes above the latter would be bullish for a possible run towards 6,300-6,350 and would also depend on the strength in Tech’s earnings over the next few weeks.

Crucial support at 6,100-6,075 has been holding since mid-May. Last Thursday’s low tapped 6,081 and the June 29th low reached 6,087. This may have served as a temporary double-bottom if Tech can continue to rebound this week.

A move below 6,075 could be a good shorting opportunity for a continued backtest to 6,025-6,000 and the 100-day moving average. This would also ruin the likelihood of a summer, or July rally.

The Transports are breaking out to fresh all-time highs with the Dow Jones Transportation Average ($TRAN) clearing the 9,700 level on Friday along with today’s pop to 9,716.

 

 

 

Continued closes above 9,700 would get 9,800-10,000 into play. Near-term and fresh support is at 9,600-9,500 with the latter representing December and January peaks. A mini golden cross has also formed with the 50-day moving average clearing the 100-day moving average.

I will update you tomorrow as usual.

All the best,

Roger Scott

Head Trader
Market Geeks.