Hello Everyone, I hope you enjoyed the US Independence Day Celebrations and the limited trading Volumes for the week. We will now be moving into Q2 Earnings and we could see more Fireworks ahead!
Weekly Sound Bites:
• In a repeat from last week, the first half of the year is in the books! Performance was strong, S&P up 17.35%; NASDAQ 20.66%; DOW 14.03; RUT 16.17%…yet if you include Q4 numbers change a good deal; S&P -1.75%; NASDAQ -3.67; DOW -2.5%; RUT -9.48%….And for June saw the S&P up 6.9% for best June since 1955…But we also see the Debt markets via US Treasuries turning in a great performance as well…30 Yr. Bonds up 6.34% which Yields on the 10 Yr. dropped 32.33% down to close at 2.00%. So, markets are showing an interesting take on current economic behavior…since 2018 we’ve seen the S&P performance as relatively flat…and earnings guidance for the second half of 2019 is lower so the reminder of year performance will not measure up compared to first half of year…
• There is a 100% probability of a rate cut at this upcoming end of July FED Mtg of 25 bps moving the interest rate band down to 2%-2.25%…In a holiday shortened week where the US saw its 243rd birthday we also saw the markets reach a milestone of over 10 Year bull run!….we still saw Fireworks with market action reacting to the Trump/Xi Trade reboot, Trump’s handshake at the DMZ with Kim Jong Un, More Iranian Threats, Protests in Hong Kong and OPEC Oil Production Cut extensions thru March 2020…some analysts are now calling for an S&P target of 3260 (up 9% from this Friday’s close)…with the very strong Jobs Numbers hitting the wires this past Friday we seem to be in a Good News is Bad News from a price action perspective with good economic data lowering the probability of future FED Rate Cuts…
• And keep in mind that FED mistakes can cause drastic market price action responses…we only need to go take a look at the month of Dec 2018 to see how prices reacted to a very Hawkish Power Ranger Boom-Boom Powell’s statement on Dec 3rd that Quantitative Tightening is on auto pilot and suggesting for 2 more rate hikes in 2019…and this was after their rate hike at that Dec meeting…prices responded with a huge shellacking with a downward move of about 10%; and only until Powell came out in early January 2019 and did a huge course correction and change that December statement with comments suggesting no more rate hikes and QT will wind down shortly…of course price action regained that 10% Dec drop quickly and we’ve been moving higher since…This big move down and then back up saw the largest swing in consumer capital since the 1940’s…
• And on deck in the batting circle is the forthcoming Q2 Earnings and the number to beat is at zero! So I would say the bar is very low…in fact we’ve seen a larger percentage of downward earnings revisions for this Quarter in over a decade…but with a very low bar comes the opportunity for more upside beats and thus we have more chance of upside surprises…very arcane how price action works but all you need to know about market price direction is that it’s not about where we are now; –it is about where we are going….If typical earnings patterns hold true, upside surprises would push Q2 Earnings Growth to 2.6%…
• And over in Europe they have nominated Christine “Queen Bee” Lagarde into the role of ECB President and her views, which are quickly being dissected and they appear to be as Dovish as Super Mario’s, the current ECB President….European stocks rallied on the news…their day of reckoning will come should they fall into a deep recession with their current rates at a negative 40 BPS…there will be little shelter in the storm when this finally hits…
Enjoy the Weekly Round-Up;
Don’t Be A Rat Brain Trader – Be the Red Stripped Zebra !!
Trade Smart !!
hpb
