$SPY, $STUDY, Poor
earnings, coupled with a dip in crude oil prices back to a multi-month low,
took the steam out of stocks Friday. Energy stocks gave up their gains from the
past three sessions while a drop in treasury yields sent bank stocks lower. A
miniature gain (+0.2% vs. 0.6% expected) in Q2 Employment Cost Index had
investors questioning whether there is enough justification for the Fed to
raise rates in September. Saving the day were the biotech (on AMGN earnings)
and small cap stocks. Russell 2000 closed higher but the three major indexes
all finished lower.
In spite of the technical
condition of the market improving slightly last week there was no change in the
Alpha Major Market Model, the Traders Model or the Asset Allocations recommendation.
With
earnings season slowing down and many investors heading out of town for
vacation before school starts, expect trading to slow in the next several
weeks. For next week, focus is likely to be on the July jobs report and the
Fed. Investors are waiting to see whether July’s jobs data would meet the Fed’s
criteria for “some further improvement in the labor market” for a rate hike.
Technically, the longer term trend remains up but the S&P 500 isn’t likely
to get out of its sideways pattern any time soon. Expect a lackluster market in
the near term.
The end of July Alpha
Master list up date has been completed with 158 names on the new list. You can tell by comparing this week’s statics
which are listed below that the new list offers more names worth watching. Of note the new list is comprised of names
from seven sectors led by the Technology sector with 44 names representing 27% followed
closely by Healthcare with 40 names at 25%.
Encouragingly the combined Consumer sector represented 36% of list which
may bode well for the overall economy.
Keep a watchful eye on the
Dow Jones Transports which have been making lower highs and lower lows since
topping out on 11/28/14 and the chart pattern suggests that the index has put
in a double bottom and could trade higher. As has been mentioned previously it
would be difficult for the broader market to move higher without participation
from the transports. This week’s move above its 50-day moving average and a
continued rise above 8500 would signal that the intermediate-term trend of the
index is back to a bull confirmed trend and would be a positive for the overall
market.
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