U.S stock futures are down big this morning due to the continued tension between the U.S. and China. European markets were down, and Asian markets had their worst drop in 10 months. Fears of a prolonged trade war have investors worried at the start of a new week. The 10-year treasury yield moved down to 1.78% a three-year low as investors are seeking lower-risk assets.
The S&P 500 move below support at 2874.68 and closed at 2844.74 for a loss of 2.98% on Monday. The volume was above average, but it was lower than the volume from last Wednesday and Thursday. So, the selling pressure could be drying up soon. The RSI index confirmed the selling with a close below the 30 level at 28.01. The next level of support could potentially be at the 2800 level, which is just above the crucial 200-day moving average at 2790.39.
The PMI Services Index was at 53.0 for July compared to 51.5 for June, and the ISM Non- Manufacturing index was 53.7 compared to a prior report of 55.1.
We are currently long term bullish and short cautious.
John N. Lilly III
Accredited Portfolio Management Advisor℠
Accredited Asset Management Specialist℠
Portfolio Manager, RJ
Partner, Windsor Wealth
The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that measures the speed and changes of price movements.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S stock market. Past performance may not be indicative of future results. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investors’ results will vary. Opinions expressed are those of the author John N. Lilly III, and not necessarily those of Raymond James. “There is no guarantee that these statements, opinions or forecast provided herein will prove to be correct. “The information contained was received from sources believed to be reliable, but accuracy is not guaranteed. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. The charts and/or tables presented herein are for illustrative purposes only and should not be considered as the sole basis for your investment decision. International investing involves special risks, including currency fluctuations, different financial accounting standards, and possible political and economic volatility. Investing in emerging markets can be riskier than investing in well-established foreign markets.
U.S. Services Purchasing Managers’ Index (PMI) is based on monthly questionnaire surveys collected from over 400 U.S. companies which provide a leading indication of what is happening in the private sector services economy. It is seasonally adjusted and is calculated from seven components, including New Business, Employment and Business Expectations.
The Institute For Supply Management surveys more than 375 firms from numerous sectors across the United States for its non-manufacturing index. This index covers services, construction, mining, agriculture, forestry, and fishing and hunting. The non-manufacturing composite index has four equally weighted components: business activity (closely related to a production index), new orders, employment, and supplier deliveries (also known as vendor performance). The first three components are seasonally adjusted but the supplier deliveries index does not have statistically significant seasonality and is not adjusted. For the composite index, a reading above 50 percent indicates that the non-manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. The supplier deliveries component index requires extra explanation. A reading above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries. However, slower deliveries are a plus for the economy — indicating demand is up and vendors are not able to fill orders as quickly.
The 10-year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance. U.S. Treasury securities are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. Bond prices and yields are subject to change based upon market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. Holding bonds to term allows redemption at par value. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise.