[MM_Member_Data name=’firstName’],

U.S. stocks moved higher Wednesday, recouping some of the losses from a day earlier. Banks and other financial companies were up the most. Utilities were the only laggard. Investors eyed the latest company earnings and deal news.

Global Economy – European stocks are down at a 2-month low.

European exporters are weaker after EUR/USD to a 1-year high, which makes European goods more expensive to foreign buyers, and the 10-year German bund yield jumped to a 1-month high after Tuesday’s hawkish comments from ECB President Draghi bolstered speculation the ECB may soon begin to taper asset purchases.

Market Analysis – Americans signed fewer contracts to buy homes in May, the third straight monthly decline and evidence that a shortage of homes for sale has suppressed home-buying.

The National Association of Realtors says that its pending home sales index fell 0.8 percent in May to 108.5. That’s down from 109.4 in April and 111.3 in March. The index has slipped 1.7 percent over the past 12 months.

Would-be buyers are facing higher prices and fewer options. Sales listings have plunged 8.4 percent over the past 12 months to 1.96 million. The median sales price in May rose 5.8 percent from a year ago to $252,800.

Market Sentiment – Sep 10-year T-note prices are down at a 4-week low as upbeat comments from San Francisco Fed President Williams makes the case for additional Fed rate hikes.

San Francisco Fed President Williams said growth in real wages in the U.S. is outpacing productivity, which is a “sign of a stronger economy,” and that “we are seeing signs that as the labor market gets tighter, that wage growth is picking up.”

Technically, expect price to continue trading lower till 50 day line is violated to the downside. There’s very little catalyst to cause price to rise over the near term, which will cause further downside to develop and increase selling pressure ahead.

Stock Market Analysis – Stocks are seeing mild upside after yesterday’s heavy selling pressure. I remain slightly bearish in the short term as several key sectors are increasingly vulnerable to downside selling pressure.

The retail sector is approaching the 50 day line and I’m anticipating price to pull back to the downside in the near term, since the long term trend and the short term trend are both bearish.

Typically, the short term trend reverts to the long term trend and with negative earnings from brick and mortar retailers ahead, we can anticipate more pressure ahead, especially with momentum weakening in the overall market cycle.

Volatility levels remain low and VIX remains near the low end of price territory. Don’t expect volatility too spike too much, but we do believe trading range will increase and large caps will begin trending over the near term once again.

Wishing you the best,

Roger Scott
Head Trader
Market Geeks