Market Direction Is Important –
Updated Chart of the S&P 500 and Secondary Signals
Of our Four secondary indicators under our MTI:
Relative Strength Index (RSI)-Positive
Chaikin Money Flow (CMF)-Positive
Money Flow Index-MFI-Positive
More on the Market and the Economy:
A weak earnings report from Amazon, combined with a disappointing outlook from Visa, weighed down stocks on Friday, with the S&P 500 falling .5% to finish the week just about where it started (after setting record highs in Wednesday and Thursday). The Dow dropped below 17,000, and ended with its biggest weekly decline in six weeks, losing its gains for July.
It was a rough week for small-caps, with the Russell 2000 small cap index breaking below its 50-day simple moving average (and breathing on its 200-day).
So far, just less than half of the companies in the S&P 500 have reported earnings, with 69% topping earnings estimates and 63% topping revenue expectations.
Looking ahead, the market will have plenty to digest this week with the Fed meeting and the unemployment report, and well as data coming out for second quarter GDP, pending home sales and consumer confidence.
Fewer homes in the US were seriously underwater in the second quarter, according to RealtyTrac’s US Home Equity & Underwater Report. During the second quarter, 9.1 million residential properties were seriously underwater, which amounts to 17% of all properties with a mortgage – an improvement over the recent second quarter 2012 peak of 12.8 million seriously underwater, which equaled 29% of properties with a mortgage. Another 8.8 million properties were on the verge of resurfacing with positive equity.
The IMF cuts its US growth forecast for this year to 1.7% (from April’s projection of 2.8%) because of the first quarter contraction. The outlook for the world economy was cut to 3.4%, with the report noting that “global growth could be weaker for longer, given the lack of robust momentum in advanced economies”. Among developing economies, the biggest cut in growth forecasts was for Russia, with a reduction to .2% from a previous 1.3%.
The IMF also suggested that while the Federal Reserve’s tapering of its bond-buying program is “appropriate”, the timing of an interest rate hike “might have to be adjusted”. The Federal Reserve may have the scope to hold interest rates at zero longer than expected: if inflation remains muted and if stagnant wages and low labor force participation hold back growth, “policy rates could afford to stay at zero for longer than the mid-2015 date currently foreseen by the markets”.