Tuesday, July 02, 2013

Still Testing The Overhead 50-Day

The markets are higher again in early trading.  Yesterday the S&P 500 tested its overhead 50-day average but turned lower from there and closed around its mid-point of the day's trading range.  This morning it is once again testing that overhead 50-day average near SPX 1624.  Ditto the Dow and the Nasdaq 100.

The big news this morning was the EU and IMF telling Greece they have 3 days to prove it can fulfill its bailout conditions or risk not receiving its next tranche of aid.  Something tells me that this is going to be an ongoing issue for years with Greece.

The news has most European markets trading lower.  And Asian markets were mixed overnight.  The Reserve Bank of Australia held rates steady at 2.75%, but left the door open to rate cuts.  And Hong Kong retail sales grew less than expected at 12.8%.

The dollar is a little higher today leaving commodities mixed.  Oil prices are higher near $98.85 while metals are lower.  Gold prices are down to $1247 after yesterday's rally.  Silver and copper prices are also lower.

The 10-year yield is easing back below the 2.5% level to 2.48% currently.  And the volatility index has fallen back below the 16 level to 15.98 at present.  The declining VIX is a bullish sign if it can continue.

Trading comment: Three of the major indexes are still testing their overhead 50-day averages.  If they are able to close above them and stay there for a few sessions it would increase the likelihood that the market can make a stab at its yearly highs reached in May.  But that is definitely not a given.  It is also very possible that the market could continue to chop around in the summer months.  Second quarter earnings season starts soon and will surely color the landscape.  Our assessment is that expectations are running fairly low as earnings estimates have been trimmed in recent weeks.


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