The S&P 500 futures are down 54 points and are trading 1.4% below fair value. The Nasdaq 100 futures are down 103 points and are trading 0.9% below fair value. The Dow Jones Industrial Average futures are down 422 points and are trading 1.4% below fair value.
There is still a bit of hesitation driving sentiment today after JPMorgan (JPM 108.56, -3.35, -3.0%) reported worse-than-expected earnings and revenue. JPMorgan also suspended stock buybacks.
A few Fed officials have made comments fueling fears of a 100 bps rate hike for the next meeting instead of the expected 75 bps. Atlanta Fed President Bostic (not an FOMC voter) said “everything is in play” to combat price pressures. Cleveland Fed President Mester (FOMC voter) said that the central bank will need to go well beyond the neutral level of rates.
Concerns about European fragmentation is in play with the potential collapse of the Italian government. Italy’s 5-star movement said it would not participate in a parliamentary confidence vote and Prime Minister Draghi said he would not head an administration without the 5-star movement’s participation.
The 2s10s spread has become more inverted with the 2-yr note yield up five basis points to 3.17%. The 10-yr note yield is up two basis points to 2.93%.
The energy complex has mostly made downside moves overnight. WTI crude oil futures are down 2.0% to $94.40/bbl. Unleaded gasoline futures are down 3.1% to $3.13/gal. Natural gas futures remain higher, up 0.9% to $6.64/mmbtu.
(Michael Gibbs, Director of Equity Portfolio & Technical Strategy)
The S&P 500 rallied later in the day to close higher at 3801.78 with below-average volume of 2,507,33,760. This morning the index is indicated to open 1.396% lower at 3751.25. That would be above potential support at 3738.67, and we feel that level could potentially be taken out in today’s trading.
If so, the next possible support level would then become 3636.87, and we continue to believe that level will potentially be tested soon.
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.