"The market does not beat them.They beat themselves, because though they have brains they cannot sit tight."
Jesse Lauriston Livermore
Happy Sunday
We have a shortened trading week ahead with an early close on Tuesday with the July 4th holiday on Wednesday. I am not expecting it to be a very exciting week of trading but we never know what may happen. There are several events taking place with regard to the "trade war" with Canada and EU imposing retaliation tariffs starting July 1 in response to our steel and aluminum tariffs, China's 25% tariffs on a list of US goods are expected to kick in on July 6th. Mexico has a presidential election that closes today and the odds are stacked in favor of a leftist candidate that has pledged to stand up to the POTUS which could make NAFTA negotiations more challenging in the weeks and months ahead.
We also have plenty of economic data due out next week along with the release of the FOMC minutes that could impact the markets.
Next weeks Economic Calendar
MONDAY, JULY 2
9;45 am Markit manufacturing PMI (final) June -- 54.6
10 am ISM manufacturing index June 58.3% 58.7%
10 am Construction spending May 0.0% 1.8%
TUESDAY, JULY 3
Varies Motor vehicle sales June 16.9 mln 16.9 mln
10 am Factory orders May -0.1% -0.8%
WEDNESDAY, JULY 4
None scheduled
Independence Day
THURSDAY, JULY 5
8:15 am ADP employment June -- 178,000
8:30 am Weekly jobless claims 6/23 224,000 227,000
9:45 am Markit services PMI (final) June 56.5
10 am ISM nonmanufacturing index June 58.0% 58.6%
2 pm FOMC minutes
FRIDAY, JULY 6
8:30 am Nonfarm payrolls June 205,000 223,000
8:30 am Unemployment rate June 3.8% 3.8%
8:30 am Average hourly earnings June 0.3% 0.3%
8:30 am Foreign trade in goods, services May -$43.6 bln -$46.2 b
*Source MarketWatch *
As we start a new month and new quarter it is important to try and get a grasp of what the technical indicators may be telling us for indexes and sectors to help identify opportunity or areas we may want to avoid.
Sector Breakdown
Oil and Energy have been very solid however as you can see Oil is hitting some short term trend line resistance as it hits the top of its channel. The USO chart has 3 candles completely out of the upper bollinger band. There was a surprise tweet from Trump suggesting that Saudi Arabia agreed to boost output to bring down prices and offset supply concerns but the tweet is already being downplayed. Either way oil looks a bit extended and the oil and energy names will likely move in sympathy to oil. The question is how much meat is left on the bone for oil and energy names in the near term after the big run up? If you are already in and have some nice gains consider locking some in and if you are looking to get in be patient and look for areas of support in the event of a pullback. XLE and XOP are both putting in lower highs in the short term time frame
With oil potentially taking a breather transportation could get a bounce sitting right near potential price support just over the 182 area. It is also trying to reclaim the 200 day. However if oil continues to rip the IYT could lose that price support as well as a longer term trend line. If its going to bounce this is the time to do it
Tech I don't really expect any real definitive moves this week however the QQQ is sitting on the 50 day and strange things can happen in low volume shortened trading weeks. More than likely we could just continue to consolidate in this area
Semiconductors have been fairly weak lately and they are trying to hold onto the 200 day there is a lot of negative sentiment from the talking heads on the financial networks for the space. It is short term oversold and I think the sector could become very compelling on a pull to the 97 price range where there could be some price support. The long term trend line could be tested and if it takes it out with conviction there could be more pain ahead. Tread carefully here
Financial stocks passed their stress tests and announced buybacks which gave the sector a little bounce but it has been short lived.
One warning sign is the 50day on the cusp of crossing below the 200 day the infamous death cross. The 25 area on the XLF could act as price support for a bounce. As of right now the sector is till guilty until proven innocent. If you are looking to take positions for swing or long term holds I would be looking to scale into your favorite names at areas of potential price support
Industrials understandably under pressure with all the trade war concerns. Testing potential price support around 70 and also looking at a death cross on the daily. Guilty till proven innocent, caution advised and if you are looking for long term hold positions look for areas of potential price support to scale into your favorite names but understand that if the trade war escalates the weakness in this sector is likely to increase as well
Health care trying to hold onto the 50 day could test 82 area of potential price support. If that fails likely going to see a test in the 80 area. There are some beaten up names in the space and the sector is guilty till proven innocent. If you are looking for long term hold positions look for areas of potential price support to scale into your favorite names> tread carefully
Biotech has pulled back recently after a really nice short term run now trying to hold above the 50day could see some follow through in the space and there are a lot of individual names in the space the have compelling looking set ups however you must always be aware of the potential binary events risks that come with trading names in the space> IE drug approvals or denials, phase 1 2 3 data, capital raises, CRL notices from the FDA, Always do some due diligence before jumping in a name and understand the potential risks and catalysts that may lie ahead https://www.biopharmcatalyst.com/ is a fantastic resource for finding that kind of info quickly.
Homebuilders have been under a lot of pressure but we just had two builders report strong earnings and the sector is trying to bounce off potential price support I like a few names in the space an could be looking to start swings for a short term bounce play. The 50 day is below the 200 day however the 38 area seems to be holding as potential support
Small caps have been on fire and due for a pullback. We had that last week and are now testing the 50 day as support. We may see some consolidation in this are and if the 50 day fails to hold we could be looking for a test to the 160 area as potential support. Keep an eye on the dollar if we see weakness in the dollar we could see some continued weakness the small cap space
Consumer staples are consolidating just under the 100 ema as we are starting to see some M&A in the space. I think we will continue to see that activity but several names have already had a nice move and now need to consolidate a bit. I still like the space it just may need to take a pause.
Consolidating sitting on a short term trend line trying to reclaim the 50day we may just see more consolidation as we try to hold above the 200 day
Aerospace and defense sitting on top of the 200 day there are some stocks in the space that could be near attractive support areas. These are typically thicker stocks more long term hold plays and several of the charts have the death cross or trading below their 200 day guilty till proven innocent but could be time to start dipping the toe
This weeks sample stocks from the Pro member Video
$MEET $PRSP $ARWR $GBX $TVPT $CYRX
July 2nd-6th 2018 Stocks to watch for trading and investing from Alpha Wolf Trading on Vimeo.
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