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U.S. markets traded mixed to start the week as Technology, Financials and Healthcare stocks edged higher. The Nasdaq set another record high while the broader market pulled back.

Small-caps showed some strength as Wall Street awaits the heaviest volume of 2Q earnings season due out this week. In addition, the FOMC meeting that begins tomorrow has also caused some tentativeness. 

Alphabet (GOOGL) reported earnings of $5.01 a share on revenue of $26.01 billion after the closing bell. Analysts were looking for a profit of $4.46 a share on revenue of $25.64 billion.

Despite the top and bottom line beat, shares were down 3% in after-hours trading as of this update.

Global Economy –European markets were mostly lower and were led by U.K.’s FTSE 100 index which dropped 1%, while giving up all of last week’s gain.

The Stoxx Europe 600 slipped 0.2% to close at its lowest level since July 11th and the DAX 30 index fell 0.3%. France’s CAC 40 index bucked the bearish sentiment, after rising 0.2%.

Asian markets began the week split, with Japan’s Nikkei Stock Average and Australia’s ASX both falling 0.6%. The Hong Kong’s Hang Seng Index rose 0.5% after its nine-session winning streak ended Friday while South Korea’s Kospi edged higher by 0.1%

Oil prices climbed following a key Organization of the Petroleum Exporting Countries meeting. Saudi Arabia pledged lower exports, while Nigeria plans to limit its production.

U.S. Economy-U.S. June existing home sales came in 5.52 million versus expectations of 5.62 million.

U.S. Markit manufacturing PMI was unchanged at 54.2 in July, while manufacturing came in at 53.2 in July from 52.0 in the previous month. This represented the 14th consecutive month of expansion.

Market Sentiment –The Fed is widely expected to leave its 1.00% to 1.25% rate band in place thanks mainly to the slowing in inflation. Many Committee members also want more evidence of a pick-up in growth after the disappointing 1.4% Q1 pace.

While there has been some speculation the Fed could announce the start of quantitative tightening, QT, Wall Street is doubtful.

Even though the FOMC surprised the markets at its June meeting by outlining details of it balance sheet unwind, there has been little Fedspeak since to prepare the markets for the initiation of the run-off as soon as August.

The Fed may also want more evidence to support their forecasts for a pick up in growth. There is chatter the Fed will announce QT either in August or September, and hike rates again in December. As far as the economic outlook, the Fed’s statement should be similar to June’s and will likely remain upbeat on the job market, cautiously optimistic on the economy, and guarded on inflation.

The iShares 20+ Year Treasury Bond ETF (TLT) traded in negative territory throughout the day to end a 6-session win streak with the low reaching $125.17.

Lower support at $125.50-$125 held with additional help at $124.50-$124 and the 50-day moving average. Resistance has moved down to $125.75-$126.


Market Analysis-The Spider Dow Jones Industrial Average (DIA) closed lower for the third-straight session and has posted losses in five of the past six sessions.

DIA is trying to form a new base of support above $214.50-$215 and a level that has been holding since early July. Continued closes above the latter keeps resistance at $216-$218 in play.

The recent all-time high is at $216.68. A move below $214.50 will likely lead to a continued backtest to $212.25-$212 and the 50-day moving average.


The Dow Jones Transportation Average ($TRAN) has been in a nasty pullback over the past week and is trying to hold a crucial support in the 9,400-9,350 area.

The Transports have been holding the 50-day moving average since late May with a close below the latter being a bearish development.

We talked about the importance of the 9,700 level holding earlier this month that would help support the Dow Theorists and the blue-chips but fresh resistance is now at 9,450-9,500. Continued closes above 9,600 would be a sign of regained momentum.


All the best,
Roger Scott.