In this week’s edition you will find:
- Where We Are
- What Was Important About Last Week
- What We Are Watching For This Week
- A Word On Discipline
Where We Are:
Taking a look at the broader market:
The Bulls take control for the holiday week.
Advances in key sectors improves our technical outlook to a Bullish bias.
However, the past three weeks show a dominance of sellers.
Our Yellow Flag indicates no bias.
We need to be careful not to look too much into last week.
The Dow Industrial Average
($INDU), +1.5%, rallies off its 50-day MA just shy of a new high.
The S&P 500
($SPX), +1.8%, also rallies off its 50-day MA just shy of a new high.
($COMPQ), +2.4%, climbs to a new high.
($RUT), +2.2%, moves to the top of a two-month trading range.
Volume indications for the past three weeks favor the Bears.
Key chart action for the week:
Charts courtesy of Stockcharts.com
The U.S. Dolar Index ($DXC) plunges to just shy of a new low.
The Gold & Silver Miners Index ($XAU) moves to the top of a year-long trading range.
The Consumer Index ($CMR) puts in a modest rally under its 50-day MA.
The Cyclical Index ($CYC) moves to a new high.
The Technology Index ($DJUSTC) climbs to a new high.
The Semiconductor ($SOX) breaks out to a new high for the year.
The Software Index ($GSO) sells off below its 50-day MA.
Telecom Index ($XTC) moves to just shy of a new high.
The Banking Index ($BKX) puts in a modest rally below its 50-day MA.
The Broker Dealer Index ($XBD) moves above its 50-day MA, shy of a new high.
The Retail Index ($RLX) rallies above its 50-day MA, shy of a new high.
The Healthcare Index ($HCX) rallies, though remains below its 50-day MA.
Biotechnology Index ($BKX) consolidates below its 50-day MA and above its 200-day MA.
Pharmaceutical Index ($DRG) put in a rally though stays below its major MA’s.
The REIT Index ($DJR) rally to just short of its 50-day MA.
The Transportation Index ($TRAN) rallies to above its 50-day MA, though is shy of a new high.
The Airline Index ($XAL) rallies to above its 50-day MA, though remains below its 200-day MA.
The Defense Index ($DFX) climbs to just shy of a new high.
The Energy Index ($IXE) barely makes a new high.
What Was Important About Last Week
- Non-farm payrolls increased 132,000 in June while revisions to April and May added a total of 75,000 to payroll growth. The consensus expected a gain of 125,000.
- Sectors performing well in June included education and health (+59,000), restaurants and bars (+35,000), and state and local government (+41,000). Upward revisions to April and May were centered in financial services, manufacturing, leisure and hospitality, and retail trade.
- Non-residential construction payrolls increased 12,000 in June, while residential construction jobs were unchanged.
- The unemployment rate remained at 4.5%. Average hourly earnings increased 0.3% (0.35% un-rounded) and are up 3.9% versus a year ago, consistent with nominal wage gains in the late 1990s.
- The ISM non-manufacturing business barometer (a measure of production growth in the services sector) increased to 60.7 in June, the highest level since April 2006, just before the US economy hit its recent slow-growth patch. The consensus expected a decline to 58.0 from the May level of 59.7. Levels above 50 signal expansion and levels below 50 signal contraction in the services sector. Despite a decline in the new orders index to 56.9 in June, from 57.4 in May, the level of orders remains robust. The employment component rose to 55.0, the highest in a year. The prices paid component decreased slightly to 65.5 versus a level of 66.4 in May.
- The ISM Manufacturing index increased to 56.0 in June from 55.0 in May. The consensus expected the index to be unchanged at 55.0. (Levels higher than 50 signal expansion; levels below 50 signal contraction.) The index was driven upward by an increase of 4.6 (to 62.9) in the production component. The new orders component rose by 0.7 points (to 60.3). The prices paid index declined to 68.0 from 71.0, but remains at a high level.
What We’re Looking For This Week
Key earnings releases:
- MONDAY: ALCOA Inc (AA), Schnitzer Steel Industries, Inc. (STLD)
- TUESDAY: Infosys Technologies LTD (INFY)
- WEDNESDAY: Genentech, Inc. (DNA), Ruby Tuesday (RT), Yum! Brands, Inc. (YUM)
- THURSDAY: Fastenal (FAST), Marriott International (MAR)
- FRIDAY: none
On the economic front we have potential market movers with:
- MONDAY: Consumer Credit
- TUESDAY: Wholesale Inventories
- WEDNESDAY: Crude Inventories
- THURSDAY: Initial Claims, Trade Balance, Treasury Budget
- FRIDAY: Export Prices ex-ag., Import Prices ex-oil, Retail Sales, Retail Sales ex-auto, Business Inventories, Mich Sentiment-Prel
- The Growth Stock Landscape
- What We Like – What We Have
- This Week’s Scans: • SETUPS • BREAKOUTS • BASE BUILDING • SHORTS
This Week’s Word On Discipline:
“No evil propensity of the human heart is so powerful that it may not be subdued by discipline.” – Seneca