Trump's Turnaround Tuesday

US equity indexes closed on a fractionally weak note, sp -1pt at 2885. The two leaders - Trans/R2K, both settled -0.3%. Near term outlook offers chop on Wednesday, with sig' weakness on Thursday.

sp'daily5

VIX'daily3

Summary

The day began on a positive note, with the US market partly inspired via strength in Asian and European markets. Meanwhile, the US President couldn't resist at 8.47am EDT...

Just another presidential complaint about the fed

QT is currently scheduled to conclude by end September. Its very possible the fed might bring that forward to end July, or even end June. Rate cut'1 is on the menu for the FOMC of July 31st. Its notable that mainstream consensus is increasingly leaning toward THREE rate cuts before year end. With just a little bit of econ-cooling, we could expect FOUR, taking rates to 1.25/1.50%. I would expect print central to seriously consider launching QE4 when rates are around 1.00%.

The SPX saw an early high of 2910, just 3pts shy of tagging a legacy gap of 2913/32.

Trump continued at 9.55am EDT...

That effectively nailed the opening high, with equities reversing, and turning negative into the afternoon. Indeed, they don't call it turnaround Tuesday for nothing.

Volatility picked up a little, with the VIX settling +0.3% at 15.99. The s/t outlook offers a choppy Wednesday, whilst Thursday should strongly favour the equity bears.


Meanwhile...

The Kudlow reappeared after a brief medical leave, and continued to play the dual sided mantra that the US economy is very strong, whilst still looking for the fed to cut rates. Larry added he is not arguing for lower rates on the basis of a weaker economy, but on subdued inflation. Hmm

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Goodnight from London
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Positive start to the week

US equity indexes started the week on a positive note, sp +13pts (0.5%) at 2886. Nasdaq comp' +1.0%. Dow +0.3%. The two leaders - Trans/R2K, settled +0.9% and +0.6% respectively. Near term outlook offers a cooling wave to at least sp'2800.

sp'daily5

VIX'daily3

Summary

US equities opened moderately higher, and built gains into the early afternoon, with a new cycle high of sp'2904. The afternoon saw some distinct cooling. Volatility was subdued, with the VIX settling -2.2% at 15.94. S/t outlook offers a multi-day cooling wave to at least the sp'2800 threshold.


Busy weeks ahead

The mainstream have been looking ahead, with consensus that rate cut'1 will be announced at the FOMC of July 31st. Between now and end July, we have a very busy seven and a half weeks...

Keep in mind, Q2 earnings season will also be well underway ahead of the July 31st FOMC. Right now, Q2 GDP can't be expected to come in any higher than around 1.5-2.0%.

Some are wondering if Print Central will cut rates by 50bps, but this is very unlikely. Instead, we can expect repeated cuts of 25bps. Most accept two or three cuts are probable before end.

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Weekend update - US equity indexes

It was a very bullish week for US equity indexes, with net weekly gains ranging from 4.7% (Dow), 4.4% (SPX),+4.1% (NYSE comp', Transports), +3.9% (Nasdaq comp'), to +3.3% (R2K).


Lets take our regular look at six of the main US indexes (monthly candle charts)

sp'500

From a Monday closing hour low of 2728, the SPX powered back upward, with a net weekly gain of 121pts (4.4%) to 2873. More broadly, keep in mind the outright bearish May settlement. There is plenty of time left within June, to see the current gains fully erode, and settle back under the key 10MA - currently at 2778. Any monthly close >2780 would offer a run to giant psy'3K, with next Fibonacci extension of 3047.
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Nasdaq comp'

The Nasdaq gained 289pts (3.9%) to 7742, notably back above the key 10MA. More broadly, price momentum remains outright negative.


Dow

The mighty Dow swung from a low of 24680 to 26072, with a net weekly gain of 1169pts (4.7%) to 25983, back above the key monthly 10MA. Its notable that price momentum has been negative since Oct'2018. Note the lower bollinger in the 23400s, some 10% to the downside.


NYSE comp'

The master index gained 501pts (4.1%) to 12765, back above the monthly 10MA. This remains Gundlach's key index, which has some of the most bearish technical divergences of any index. Soft downside target are the 11800/700s.


R2K

The second market leader gained 48pts (3.3%) to 1514, but still below the monthly 10MA. Note the lower monthly bollinger at 1390.


Trans

The 'old leader' - Transports, gained 402pts (4.1%) to 10140, but notably still under the key monthly 10MA.
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Summary

All six of the main US equity indexes saw powerful net weekly gains

The Dow lead the way upward, with the R2K lagging.

Four indexes are back above their respective monthly 10MA, with the two exceptions being the R2K and Transports.

YTD price performance:

The Nasdaq comp' continues to lead, currently +16.7% for the year. The SPX is +14.6%, the R2K +12.3%, and the NYSE comp' +12.2%. The Dow is +11.4%, with the Transports lagging, but still higher by a respectable 10.6%.
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Looking ahead 

Earnings: LULU (Wed'), AVGO (Thurs').

M -
T - PPI
W - CPI, EIA Pet' report, US T-budget
T - Weekly jobs, import/export prices
F - Retail sales, indust' prod', consumer sent', busi' invent'
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Final note

Late Friday it was announced the initial 5% tariff on Mexico by the USA would not proceed, and the market will clearly be inclined to begin next week on a a positive note.

Short term price momentum is at heights not seen since the big turn in Dec'2018. A significant cooling wave will be due regardless of the Monday open. The issue then, does this past Monday's low of 2728 get taken out? Even if that happens, equity bears can't expect anything much below 2675.

July 31st will offer rate cut'1. By definition, the mainstream will see that as a positive (much as they did Sept'2007), even though the reality is that such rate cuts arguably do little of significance to support the economy.

For now, the bearish May settlement stands as important. The fact the Transports and R2K are still broadly weak should be at least a 'mild concern' to those bulls who believe everything is fine again.

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