Stock Market Update For The Week Ahead: 'How Long Can Tech Lead?'

The Last Week In A Nutshell

What Happened: “The S&P 500 is up 1.3% month-to-date (through June 25), but has struggled to push higher as it moves towards its previous peak,” said Lindsey Bell, chief investment strategist for Ally Financial, Inc-owned (NYSE:ALLY) Ally Invest.

“Looking at the breadth of the market is one way to gauge the health of the overall market. Right now, only 39% of S&P 500 stocks have closed above their 200-day moving averages, even though the S&P 500 remains above its own 200-day moving average. That has us wondering how long tech can lead the market higher on its own.”

Remember This: “As good as the recent economic data has been, we want to make it clear, it could still take years for the economy to fully come back,” said LPL Financial Senior Market Strategist Ryan Detrick.

“Think of it like building a house. You get all the big stuff done early, then some of the small things take so much longer to finish; I’m looking at you crown molding.”

Pictured: Profile chart of the S&P 500 E-mini Futures

Technical: Broad market equity indices resolved a week-long balance area to the downside, albeit under weak selling. The S&P 500 index managed to one time frame lower, as evidenced by the lower highs and lows, and closed the week off below its month-to-date and week-to-date volume weighted average price benchmarks.

Recapping Last Week's Action: Monday’s session closed higher without any involvement from stronger buyers.

During the overnight session, before Tuesday’s regular trading, news regarding U.S. and China trade relations roiled markets. Later, statements regarding the relations were retracted, and markets retraced more than 100% of their move down.

After the overnight news-driven shakeout, the market failed to find any real traction during regular trading.

On Wednesday, markets liquidated on news regarding a contraction in global economic growth, later accepting prices and closing near the lows. The rotations lower were mechanical, indicative of short-term trading money.

Thursday’s activity was mostly responsive, with end-of-day economic news helping fuel a spike that erased some of Wednesday’s selling. In the evening session, alongside Federal Reserve balance sheet news, markets returned to prior day value, rejecting the end-of-day spike. After the noisy overnight, markets opened Friday, liquidated and closed near the lows.

Overall, despite the market losing ground, the selling was not all that intense, as evidenced by the mechanical rotations and weak migration of value. Every time the market attempted to go higher — or lower — it lacked the conviction to follow through. 

Though the immediate near-term trend is lower, higher prices could come just as easily on some good news. For a healthy continuation, sellers need to step up and transact in higher volumes at lower prices.

You can find non-profile charts at the bottom of this story.

Key Events: Home Sales; Consumer Confidence; ADP Employment; Construction Spending; Nonfarm Payrolls; Initial Claims; Trade Deficit.

Fundamental: IMF lowers global growth projections for 2020.

• Bayer AG (OTC:BAYRY) to pay over $10B to settle weedkiller claims.
• Users are fed up with Facebook, Inc (NASDAQ:FB).
• Russia to ramp up oil production after pandemic recovery.
• Russian rate cut to ease pressure on bank margins.
• B3’s pact with CME Group, Inc (NASDAQ:CME) is credit positive.
• Implications of one-off debt increases mitigated by debt affordability, low rates.
• One opinion suggests the Fed is not the cause of the recent broad market rally.
• The Twitter, Inc (NYSE:TWTR) user surge may be permanent.
• Top 100 companies prospering during the pandemic.
• Four factors that could weigh on recovery, spark a depression.
• Bond market looks to a tech-centric future for increased efficiency.
• 43% of firms that received PPP could be out of cash in a month or less.
• 65% of the population over the age of 18 wouldn’t mind returning to lockdown.
• 73% of economists expect the economic drop to be followed by a quick recovery.
• T-Mobile U.S., Inc (NASDAQ:TMUS) shares priced at $103 amid SoftBank sale.
• U.S. targets $3.1 billion of EU and U.K. imports for new tariffs.
• Chinese imports of U.S. goods rise, while investment into China continues.
• Tesla, Inc (NASDAQ:TSLA) signs long-term supply deal over cobalt.
• Royal Dutch Shell plc (NYSE: RDS-A) plans climate-driven restructuring.
• Nine companies in Phase 1 of COVID-19 clinical trials, while two are in Phase 2.
• Realtor.com data shows views per property in suburban zip codes grew by 13%.
• Ackman seeks $3-billion raise for largest-ever blank check company.
• Industrial power demand in China rises above 2019 levels for the first time.
• One in six young people have stopped working since the onset of COVID-19.
• Carnival Corp (NYSE:CCL) CEO remains invested despite the uncertainty.
• Americans increase deposits as banks cut back on lending.
• Restructuring supportive of Deutsche Bank AG’s (NYSE:DB) asset performance.
• Startup ecosystems rated by performance, funding, connectivity, talent, knowledge.
• Should you be inclined to sell the rally?
• Amazon.com, Inc (NASDAQ:AMZN) to acquire self-driving car startup Zoox.
• German court orders Facebook, Inc (NASDAQ:FB) to stop data sharing.
• Amazon.com, Inc (NASDAQ:AMZN) to take 16% stake in U.K. food delivery firm.
• Companies get caught up in the reparations debate.
• BlackRock, Inc (NYSE:BLK) slashed fees for its largest ETF.
• American Airlines Group, Inc (NASDAQ:AAL) warns flights may be crowded in July.
• Verizon Communications, Inc (NYSE:VZ) pulls ads from Facebook and Instagram.
• Aging of U.S. population to rein in growth, inflation and interest rates.
• Credit card industry reins in balance transfer offers as banks fear defaults.
• ETF trading affects underlying stocks a lot less than expected.
• Sentiment: 24.1% bullish, 27% neutral, 49.9% bearish as of June 27. 

Product Analysis:

S&P 500 E-mini Futures (ES) | SPDR S&P 500 ETF Trust (NYSE:SPY)

Nasdaq-100 E-mini Futures (NQ) | PowerShares QQQ Trust (NASDAQ:QQQ)

Russell 2000 E-mini Futures (RTY) | iShares Russell 2000 Index (NYSE:IWM)

Gold Futures (GC) | SPDR Gold Trust (NYSE:GLD)

Crude Oil (CL) | United States Oil Fund LP (NYSE:USO) | Invesco DB Oil Fund (NYSE:DBO) | United States 12 Month Oil Fund (NYSE:USL)

Treasury Bonds (ZB) | iShares 20+ Year Treasury Bond (NASDAQ:TLT)

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