Market Action Summary: 7/16/18


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S&P 500 overview: Bullish triangle in play

  • Consolidating, trying to break resistance at 2800
  • Calendar has potentially bullish bias as earnings build
    • Factset: 47 of 109 S&P members have issued positive guidance so far. Best since 53 in all of Q2 2010.
  • Risk: Breadth has been weak. No clear trade set-ups for index.

Economic focus: Manufacturing/industrial sector accelerating

  • Tax cuts kicking in.
    • Bank of America (BAC): Tax cuts enabled $500 million IT investment
  • Surprise growth in PC shipments in Q2.
  • June manufacturing job growth (+32K) strongest since December 2011.
  • July Empire index, June ISM manufacturing beat
  • Earnings from FAST, AZZ may foreshadow broader strength
  • RR traffic running at 3-4 year high.

Trade war: Escalating or scaling down?

  • El-Erian, Mobius: U.S. winning trade war.
  • Cramer: China non-response to $200 billion tariff threat on July 10 represents surrender to Trump.
  • China quietly wooing foreign investors (TSLA, BASF) as leaders seek fiscal stimulus and avoid denouncing U.S. in state media. Beijing not devaluing.

Commodities & Rates:

  • White House determined to prevent runaway oil prices.
    • 7/3: Saudis boost output
    • 7/16: Mnuchin softens Iran stance
  • Metals showing little inflationary pressure.
  • No clear catalyst for interest rates in near-term
  • Goldilocks for now?
  • Interesting to see refiners green with XLE down today.

Pullbacks to watch:

  • Macy’s (M), Kohl’s (KSS) bouncing at 50-day MAs after strong earnings.
  • Recent IPOs bouncing/stabilizing: Dropbox (DBX), Iqiyi (IQ), Huya (HUYA)
  • Exact Sciences (EXAS) continuing higher after positive May 30 drug data.
  • Refiners like HFC green today in sea of XLE red.

Options Activity:

  • 7/16: Target (TGT) Call roll: July 70 calls -> Jan 72.50 calls
  • 7/13: Twenty-First Century Fox (FOXA) Bullish 3-way: Aug 46p-48c-50c
  • 7/12: DR Horton (DHI) Call buying: 27-July 42.50 calls (apparent earnings play)
  • 7/12: PagSeguro Digital (PAGS) Calls rolled down: Nov 30 -> Nov 25 calls
  • 7/10: SPDR S&P Retail ETF (XRT) Put ratio spread: 27-July 48 x 27-July 47 puts (1×2 ratio)
  • 7/10: Norfolk Southern (NSC) call spread: 27-July 162.50 – 172.50
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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.