[MM_Member_Data name=’firstName’],

U.S. markets stayed underwater throughout the session with the weakness being attributed to the political fallout from the disbanding of the President’s business advisory panel.

Other rhetoric on the fate of Trump’s staff came into play along with concerns raised by the Fed about the nation’s inflation rate. The pullback was led by Technology and the Industrials as all of the major sectors finished lower.

Total earnings for the 462 index members of the S&P 500 that have reported are up 10.7% from the same period last year on 5.8% higher revenues. The number of EPS beats is at 74.5% with 68.3% topping revenue estimates.

The results from two-thirds of the Retail sector companies have been announced with total earnings for the sector up a dismal 0.1% on 6.4% higher revenues. The number of companies ahead of EPS estimates is at 76.9% with a surprisingly strong 84.6% beating revenue estimates.

Looking at Q2 as a whole, combining the actual results with estimates for the still-to-come announcements, total earnings are expected to be up 10.2% from the same period last year on 5.4% higher revenues.

This would be the second quarter in a row of double-digit earnings growth performance for the S&P 500 index.

Global Economy –European markets traded in the red with Financial stocks leading the way lower. Retail stocks were also weak. France’s CAC 40 index, the FTSE 100, and the Stoxx Europe 600 fell 0.6% while the DAX 30 gave back 0.5%. The Belgium20 declined 0.3%.

U.K. retail sales came in at 0.3% for July, just above the 0.2% forecast, driven by growth only at food and household goods stores. Sales year-over-year rose 1.3%, meeting expectations.

Asian markets were mixed with Tech stocks showing strength in a less threatening geopolitical environment. China’s Shanghai index gained 0.7% while South Korea’s Kospi index added 0.6%. Hong Kong’s Hang Seng Index was lower by 0.2% while Australia’s S&P/ASX 200 and Japan’s Nikkei Stock Average slipped 0.1%.

Japan’s exports rose 13.4% in July from a year ago, the eighth-straight monthly gain, and stronger than expectations of 13.2% year-over-year. July imports rose by 16.3% year-over-year, weaker than expectations of 17.1%.

Japan’s July trade balance was in surplus by 418.8 billion yen, wider than expectations of 327.1 billion yen.

U.S. Economy-Industrial production rose 0.2% in July, a little shy of expectations for 0.35, with capacity utilization at 76.7%.

The U.S. leading indicator rose 0.3% to a record high 128.3 in July.

Market Sentiment –Dallas Fed, Robert Kaplan, said he’s being patient in terms of the next hike and that he wants to see more progress on attaining the 2% inflation goal. He reiterated that the FOMC will be running down the balance sheet in the near future, and that the unwind will be gradual.

He also sees some slack in the labor market and stated that an aging workforce and a slower pace of growth in the workforce are headwinds to gains in the economy. Mr. Kaplan also doubted there would be much support from fiscal policy because of the already high debt level.

Fed member, Neel Kashkari, said the Fed would consider the debt ceiling negotiations when deciding the start of the balance sheet reduction schedule. He’s skeptical that the U.S. can achieve 3% growth. He also didn’t see any reason to delay the start of quantitative tightening (QT).

The iShares 20+ Year Treasury Bond ETF (TLT) traded down to $125.51 shortly after the open with support at $125-$124.50 and the 50-day moving average easily holding. The rebound and late day push to $126.68 cleared near-term resistance at $125.50-$126 with further hurdles at $127-$127.50.

A breakout above $128 could occur on a move above the latter.


Market Analysis-The Russell 2000 ETF (IWM) had been struggling with its 100-day moving average for three-straight sessions and was hinting at today’s backtest to the 200-day moving average.

It was the first breach of the 200-day MA since late June 2016. Fresh support at $134.50-$134 held with the low reaching $134.70. There is risk to $133-132.50 on a move below the latter. Resistance is at $135.50-$136.


The Spider S&P MidCap 400 ETF (MDY) was also struggling to regain its 100-day moving average this week with today’s backtest reaching a low of $308.96. The 200-day moving average held be a whisker with additional risk to $306 and mid-May support on further weakness.

A rebound above resistance at $310-$312 could signal temporary relief with a downward sloping 50-day moving average.

The mid-caps have been trading in correlation with the small-caps with both showing slight deviations from the overall market. The speculative stocks had been leading the rebound before this week’s pullback.


All the best,
Roger Scott