June 14, 2019 – Stocks had a pretty quiet week, which was probably the best we could hope for after the big decline in May and then a sharp rally to begin June. Big moves like that are often followed by periods of consolidation.
Aside from the technical factors though, there really wasn’t much happening this week to push stocks in either direction. The week’s economic data was both relatively minor and also basically in-line with expectations. Although a bright spot, but maybe not a bullish indicator, did appear today when retails sales, excluding automobiles, for May came in better than expected, while the same figures for April were revised upward.
This shows consumers are still spending money, despite all the recession talk recently. While it is undoubtedly good news as a sign of the health of the economy, it may not be entirely bullish because data like that is exactly what will keep the Federal Reserve from cutting interest rates to boost the economy. In fact, rate-cut odds, as tracked by the CME, fell today. A cut in July is still the most likely outcome according to the odds, with two cuts seeming likely before the end of the year, but strong data between now and then could shift that around.
Also, the Federal Reserve will be meeting next week. Odds of a cut next week are pretty low, but it isn’t out of the question. Either way we’ll almost certainly get some volatility between Wednesday afternoon when the decision is announced at the end of the week.
Also, possibly moving markets next week:
- More trade drama, as the G-20 Summit gets closer and China’s Premier has yet to confirm if he will be meeting with President Trump.
- The situation with Iran, after more ships were attacked near the Strait of Hormuz this week. This situation is pretty complicated as U.S. officials claim Iran attacked the ships, but the operator of one of the ships says it was struck by a projectile, as opposed to a mine.
All told this week, the S&P gained 0.47%, the Nadsaq added 0.70%, and the Dow Jones rose 0.41%.
The S&P 500, the Nasdaq, and the Dow Jones are back into favorable positions thanks to the strength we saw in the market last week. That strength was needed as the indices were under heavy pressure and facing strong technical resistance (solid lines), as well as resistance from all their major moving averages. While the indices have run sideways this week, those levels of strong resistance are now levels of strong support (dotted lines). Without any dramatic news headlines, the S&P, Nasdaq, and Dow should have a decent chance of recovery if the markets decide to pull back, with resistance becoming lighter for the indices between current levels and new highs.
If the S&P can break through resistance between 2,900-2,920, it has a very good chance of setting new highs again soon. We will want to keep an eye on the 7,900 level for the Nasdaq. If the Nasdaq can break through this level of resistance, it could also be setting new highs soon, but it will have to content with the 50-day moving average. For the Dow, 26,200 will be a key level to watch, as it is one of the last stronger levels of resistance as the index continues higher.
The Russell 2000 has performed much worse than the other major indices. While the strength we saw in the markets last week surely helped the Russell, it put the index back at key levels of strong resistance. The resistance levels between 1,535 and 1,580 are strong. While regaining some key-levels of support last week was desperately needed, as well as gaining support from the 8- and 20-day moving averages (red and blue lines), the index will need some serious strength to move above the 1,555 level, as it will also have to deal with resistance from its 50, 100, and 200-day moving averages (green, yellow, and purple lines). These moving averages are very strong levels of resistance. We could likely see the Russell run sideways, or a slow rise without any solid bouts of strength.