The markets spent last week, recovering from the Tech meltdown on June 9th and for the most part, traded slightly higher, lead by the Big Cap names of the DOW, while the NASDAQ mended its wounds and traded in a sideways corrective pattern, that allowed concerned sellers, to sell and interested buyers, to buy in an orderly fashion, leaving that volatile Index, in position for a rebound this week.
The Fed Chair Janet Yellen and her crew down at the FOMC, decided to raise rates 1/4 pt last week, even though the recent U.S. Economic data has weakened, with the U.S. Consumer reluctant to consume and a set of PPI and CPI Inflation
reports showing that Inflation is actually falling, instead of rising, raising the specter of Deflation once again. However, the Fed Chair is confident, that the strong Jobs market in the U.S., will eventually lead to higher wages, which in the end, should lead to an Inflation rate over the Feds’s target of 2.0%. Unfortunately, the Big Boy & Girl Traders of the Bond market, don’t agree with the Fed, so instead of Rates Rising as expected, they fell to 2.11% the lowest level since last November. The problem is, that with rates around the Globe so low, getting 2% on a U.S. Treasury is a bargain, so there are buyers, and many Traders believe, that the odds of a “normal” slowdown in the U.S. Economy is rising, so rates are not going anywhere, anytime, soon.
Now, low rates are not a problem for most Companies and it keeps the U.S. Dollar down, so the Multinationals can sell their goods overseas, however for the U.S. Banks, low rates keeps their Credit Spreads flat and they make less money on them and since the Banks lead the rally higher, it will be tough for them to regain the leadership role. Fortunately, since the Tech sell-off, the markets have finally come around to a Sector Rotation and that is the only way this market can continue higher. Technically coming into the new week, the DOW and S&P are extended and may trade flat for awhile, but the Tech’s after last week’s sideways action, looks ready to rebound, so look for trades in names, that have pulled back to the right price, buy slowly and make sure you use a STOP in case things don’t go well.
Overnight the Global markets traded higher and in early trading the DOW is up around 60pts, the Yields on the 10 Yr is 2.14% the Dollar is higher and Commodities are mixed with Oil up a bit to $44.80 and Gold down a bit to $1251.
We have a very light calendar this week and nothing of interest until Wed Oil report, but we will hear from several Fed Speakers all week as they explain last week’s rate hike, so keep trading and always use STOPS.
Today’s Early Markets;
DOW Futures— up 60.00 London – up 43.58
S&P – up 700 DAX – up 104.56
GOLD—$1251 July Nikkei — up 124.84
OIL— $44.80 July HangSeng — up 293.78
DOW RESISTANCE 21,430 S&P RESISTANCE 2440
DOW SUPPORT: 21,250 S&P SUPPORT: 2420
$NASDAQ RESISTANCE 6180
$NASDAQ SUPPORT 6110