The S&P 500 futures are down 20 points and are trading 0.5% below fair value. The Nasdaq 100 futures are down 10 points and are trading 0.1% below fair value. The Dow Jones Industrial Average futures are down 222 points and are trading 0.6% below fair value.
Coming off the extended Memorial Day weekend, the corporate news flow is light in terms of market-moving relevance, yet a rash of macro considerations has stirred some mixed trading interest.
The biggest talking points this morning include an agreement by EU leaders to ban 90% of Russian crude oil imports by the end of the year, Shanghai engaging in more reopening efforts, record-high inflation prints for the eurozone in May, Fed Governor Waller (FOMC voter) endorsing 50 basis point rate hikes at several meetings and indicating his support for a policy rate above neutral by the end of the year, and China reporting manufacturing and non-manufacturing PMI data for May that was improved from April but still in contraction territory with sub-50 readings.
President Biden plans to meet with Fed Chair Powell at the White House today to discuss the economy but has said he will not do anything to compromise the Fed’s independence in setting monetary policy.
This week will be a big week for economic data, starting with the May Consumer Confidence Index today (10:00 ET) and followed by the ISM Manufacturing Index on Wednesday and the May Employment Situation and ISM Non-Manufacturing Index reports on Friday.
The 10-yr note yield is up eight basis points to 2.82% and the 2-yr note yield is up nine basis points to 2.55%. The U.S. Dollar Index is up 0.3% to 101.93. WTI crude futures, in response to the EU decision on Russian crude oil imports, are up 3.1% to $118.62/bbl.
(Michael Gibbs, Director of Equity Portfolio & Technical Strategy)
The S&P 500 rallied for the third day and closed at 4158.24, just above old resistance. Also, RSI moved above the 50 lines, and the advance/decline indicator moved higher for the third day. The volume for all three days was below average, but Friday’s trading had advancing issues at 84%, which is bullish. Today, we expect some profit-taking due to a nearly 9% move off the 5/20/2022 low of 3810.32. We also believe the potential support at 4090.72 will hold if tested today. The next possible resistance level could come in near the 50-day moving average at 4276.73, but we don’t see that level being tested in the next few days.
We are currently Intermediate-term bearish and short-term bearish.
John N. Lilly III CPFA
Accredited Portfolio Management Advisor℠
Accredited Asset Management Specialist℠
Portfolio Manager, RJFS
Windsor Wealth Planners & Strategist
Futures trading is speculative, leveraged, and involves substantial risks. Investing always involves risk, including the loss of principal, and futures trading could present additional risk based on underlying commodities investments.
The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that measures the speed and changes of price movements.
The advance/decline line (A/D) is a technical indicator that plots the difference between the number of advancing and declining stocks on a daily basis. The indicator is cumulative, with a positive number being added to the prior number, or if the number is negative it is subtracted from the prior number.
The A/D line is used to show market sentiment, as it tells traders whether there are more stocks rising or falling. It is used to confirm price trends in major indexes, and can also warn of reversals when divergence occurs.
The percentage of stocks trading above a specific moving average is a breadth indicator that measures internal strength or weakness in the underlying index. The 50-day moving average is used for short-to-medium-term timeframes, while the 150-day and 200-day moving averages are used for medium-to-long-term timeframes. Signals can be derived from overbought/oversold levels, crosses above/below 50% and bullish/bearish divergences.
The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index.
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.
This is not a recommendation to buy or sell any company’s stock mentioned above.
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. 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.