Weekly Market Update – 26 June 2017 BMO

Weekly Market Update – 26 June 2017 BMO

Dexes24June

Wall Street ended the week on a positive note as the S&P 500 (+0.2%) cruised to a modest victory on the backs of the technology (+0.7%) and energy (+0.8%) sectors. The Nasdaq (+0.5%) and the Russell 2000 (+0.7%) outperformed while the Dow (unch) settled just a tick below its unchanged mark.

After some teeter tottering at the start of the week, the S&P 500 settled into a sideways trend, drifting alongside its unchanged mark, as investors lacked conviction to decisively move the market one way or the other. In the end, the benchmark index sealed its second-consecutive weekly win with a slim gain of 0.2%.

Wall Street kicked off the week on a positive note with both the S&P 500 and the Dow advancing to new all-time highs. The Nasdaq exhibited relative strength as technology and biotechnology stocks outperformed, bucking their recent bearish trends, with names like Apple (AAPL) and Biogen (BIIB) leading the charge. Financials also posted a solid performance, continuing their bullish two-week run.

The tide turned on Tuesday as the benchmark index coughed up nearly all of Monday’s advance. The energy sector finished at the bottom of the leaderboard, for the second day in a row, as crude oil continued to tumble amid excess supply concerns. However, despite the bearish tone, biotechnology stocks kept chugging along, pushing the iShares Nasdaq Biotechnology ETF (IBB) higher by 1.3%.

Range-bound action set in on Wednesday as the heavily-weighted health care and technology sectors upheld the S&P 500 amid weakness in the broader market. Staying true to the week’s trend, biotech companies were bullish, advancing the IBB higher by 4.1%, while crude oil was bearish, dropping another 2.3%, despite a relatively upbeat inventory report from the Department of Energy.

Investors shifted their attention to Washington on Thursday as the Senate rolled out its version of the healthcare reform bill. Compared to the version that the House passed last month, the Senate’s version would roll back the Affordable Care Act’s Medicaid expansion more gradually, but the cuts to Medicaid would be larger in total. However, in general, the two versions of the bill are very similar.

The health care sector took the news in stride, moving higher by 1.1%, but the S&P 500 settled slightly lower as the financials, consumer staples, and utilities sectors weighed. Crude oil did manage to secure its first win of the week, but the advance was modest in comparison to the commodity’s recent swoon. Moving into Friday’s session, the energy component held a week-to-date loss of 4.5%.

Equities ended the week on a positive note as the technology and energy sectors fended off the negatively-charged financials, consumer discretionary, and health care groups. Biotech stocks fell to some profit-taking efforts early, but the IBB still managed to pull out a win, ending the week higher by 9.6%. Crude oil registered another modest win on Friday, but ended the week lower by 4.0%.

Market participants altered their rate-hike expectations a bit this week following comments from several FOMC voters, including Fed Vice Chair Fischer, Fed Governor Powell, New York Fed President Dudley, Chicago Fed President Evans, and Dallas Fed President Kaplan.

The fed funds futures market now points to the December FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 51.3%, up from last week’s 43.4%.

(Excerpts from Briefing.com)

Dollar: The U.S. Dollar Index is lower by 0.4% at 97.24, tracking a 0.2% downtick for the week after recording a slight 0.1% dip last week. This leaves the index in an area that has been well-travelled over the past five weeks.

Bonds yields: The yield curve flattened during the week, as the 2/10 spread narrowed to 81 basis points from last Friday’s 84.

Commodities: WTI Crude falters, Silver stumbles, Gold and Copper close higher. 

Agriculture: Grains all close lower for the week

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Wk26 THE WEEK AHEAD

A week of possible bullish reprieve ahead of earnings season.

Monday 26 June to Friday 30 June (Week 26)

The twenty-sixth week of 2017 (wk26) is bullish for the DIA and the SPY over all the 5, 10 and 15 year averages with more than 60% average reliability.

Our weekly models over 5, 10 and 15 year averages show the DOW and SPY as bearish on Monday, bullish on Tuesday, Wednesday and Friday while Thursday might be a bit flat or unpredictable.

DIAweekly SPYweekly

The 2017 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 26;

Screen Shot 2017-06-26 at 1.47.28 PM

Key Economic Dates

Mon 26 June

Tue 27 June

Wed 28 June

Thu 29 June

Fri 30 June

SUMMARY

One look at the three benchmarks and you have a very good idea how difficult conditions have been in the market in the past week. The divergence is broadening more and more with each passing week just as it did between June and August 2007. With Healthcare leading the sectors for four out of the five days last week, doubt seems to have crept back into risk. But Discretionary’s performance makes you wonder if the doubt has outweighed the appetite for risk yet.

Even though the week was obviously more bearish and bullish, it still closed higher that the previous Friday to give us the illusion that this is still a bull market. Let’s not take our eyes of the proverbial ball – watch the market internals and sector performances for a clearer read on the market.

Happy Hunting!

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