Market Action Summary: 7/23/18


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S&P 500 overview: Holds 10-day MA above 2800 resistance level

  • Consolidating, trying to break resistance at 2800
  • Notice 50-hour MA break on @ES chart amid outside candle
  • Bullish triangle remains key pattern as moving averages line up more favorably.

Busiest week of earnings, led by big tech

  • About 180 of the S&P 500’s member companies on the docket
  • Facebook (FB), (AMZN), Advanced Micro Devices (AMD), (TWTR), Alibaba (BABA), Intel (INTC) etc
  • Results strong so far
    • Factset: 87% have beat on EPS, 77% beat on revenue
    • Factset: 11.6% profit margin highest in at least a decade. Seen → 11.8% next two quarters.
  • See the calendar for more.
  • Cleveland-Cliffs (CLF) options strategy pays off.

Sectors diverge as sentiment shifts toward cyclical growth

  • Banks, financials lead in the trailing 1-week period
  • Railroads proceed to new highs. Suppliers following. (TRN, RAIL, ARII, GBX)
  • Industrials: Stanley Black & Decker (SWK), Cintas (CTAS), Snap-On (SNA), WW Grainger (GWW) join the strong earnings parade.
  • Potential catalysts:
    • Thursday morning: Durable goods
    • Friday: Q2 GDP initial estimate
  • Utilities (XLU), Consumer Staples (XLP) weak
    • Are “safety plays” rolling over amid a strong economy after bear-market rally?

Bonds under pressure as economic data, auctions approach

  • WSJ: Liquidity drying up
  • Is Trump in a Catch-22 demanding weak dollar and low rates?
  • Foreign central banks often buy Treasuries to support greenback
  • Click here for special report on bonds

China showing signs of fatigue

  • Yuan weakest against U.S. dollar in 12+ months
  • PBoC record liquidity injection overnight raises eyebrows at FT, Bloomberg.
  • Fiscal stimulus increasing as economy slows, trade worries hurt confidence.
  • Commodities, other emerging markets (EEM) could be at risk.
    • iShares Brazil ETF (EWZ), Petrobras (PBR) have strong options liquidity.
  • Semiconductors/Chips (SMH) at risk from China slowdown.

Charts to watch

  • BTCUSD trying to break downtrend
  • Nutanix (NTNX) in tight range near 50-day MA
  • RH (RH) pulls back after strong earnings report
  • Weight Watchers (WTW) near 50-day MA
  • XLP, XLU at risk of rolling over.
  • Oil (@CL) unclear but has commodity/global-growth risk. XLE struggling.
    • Will airlines follow Transports higher if oil drops?
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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly 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 appraised 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.