Volatile Range-Bound Chop
Though the last several days of trading have ended on a positive note, the index charts tell the real story of a data-driven volatile range-bound chop. With ADP, International Trade, Jobless Claims, and Petroleum numbers just around the corner, we can likely expect more of the same today. The T2122 indicator favors a relief rally, but the overhead, technical and downtrend resistance remains a substantial obstacle to overcome. As you plan forward, remember the Employment Situation number Friday before the bell consensus expects to show a decline.
Asia markets closed green across the board with muted results as they reacted to the Fed minutes indicating more rate increases on the way. European markets trade higher this morning in what seems a celebration that Prime Minister Boris Johnson is expected to resign. Ahead of several potential market-moving economic reports, the U.S. futures point to a bullish open despite the 2/10 bond inversion suggesting recession.
Economic Calendar
Earnings Calendar
As usual, Thursday is the week’s most significant day of earnings reports, but it’s still a pretty light day as we move toward the beginning of the 3rd quarter season next week. Notable reports include HELE, LEVI, and WDFC.
News & Technicals’
U.K. Prime Minister Boris Johnson is expected to resign on Thursday after more than 50 members of parliament resign from his government within 48 hours. A Downing Street spokesperson told NBC News that Johnson would make a statement on Thursday, and Sky News reported that it would take place around midday London time. A Sky News tally put the total number of government departures at 59 as of 10 a.m. London time. Federal Reserve officials at their June meeting said another interest rate increase of 50 or 75 basis points is likely at the July meeting, according to minutes released Wednesday. Policymakers “recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist,” the document said. The prospect of an economic slowdown also casts a specter of doubt over whether the European Central Bank can tighten monetary policy sufficiently to rein in record-high inflation. Deutsche Bank suggested that the euro could fall into the $0.95-0.97 range if “Europe and the U.S. find themselves slip-sliding into a (deeper) recession in Q3 while the Fed is still hiking rates.” The American Gaming Association says illegal operators are a “serious threat.” The industry trade group asks Attorney General Merrick Garland and the Department of Justice to enforce existing laws. FanDuel’s CEO says unregulated; offshore sites have an unfair advantage because they don’t pay state and local taxes and don’t invest in compliance or lobbying for the expansion of sports gambling in the U.S. Treasury yields increased in early Thursday trading with the 2/10 inverted suggesting recession. The 2-year rose to 3.01%, the 10-year stood at 2.96%, and the 30-year climbed to 3.14% on Thursday morning.
With a data-filled day, price action displayed uncertainty with a volatile range-bound chop that resembled the excitement of watching grass grow. However, the bulls did mount a late-day rally, with the tech giants enjoying the majority of buying activity. Downtrends, technical, and overhead price resistance remain the challenge for the bulls, while the economic data and an aggressive Fed keep the bears active. Unfortunately, we may have to wait until the beginning of the earnings season for this logjam to break even though the T2122 indicator favors an upside move. In addition, traders can expect another dose of volatility with ADP, International Trade, Jobless Claims, and Petroleum Numbers just around the corner. If that’s not enough, be prepared for the Employment situation number Friday morning before the bell.
Trade Wisely,
Doug