Sturdy second quarter financial outcomes have been driving shares higher over the previous few weeks. In keeping with FactSet, 83% of S&P 500 corporations have reported a constructive EPS shock and 77% have reported a constructive product sales shock. These tendencies usually tend to proceed, with about 47% of S&P 500 corporations nonetheless making able to report their second quarter earnings. Second quarter GDP moreover obtained right here in at a very sturdy 4.1% in a sign that the financial system continues to extend.
Despite this strong effectivity, there are indicators that these growth costs could be slowing down. Of the S&P 500 corporations that reported their second quarter earnings, twice as many issued damaging EPS steering as issued constructive EPS steering for the third quarter. Fb, Inc. (FB), Twitter, Inc. (TWTR) and completely different tech shares moreover reported worse-than-expected second quarter earnings due to slowing particular person growth. Moreover, residence product sales have languished in key markets like Southern California.
Retailers will possible be preserving an in depth eye on a variety of key monetary indicators over the approaching week. Pending residence product sales data is coming out on July 30, the FOMC meeting announcement is on Aug. 1, and employment data is due out on Aug. 3. The Federal Reserve is anticipated to take care of charges of curiosity common at 175 to 200 basis components, nevertheless retailers will possible be listening to the central monetary establishment’s language to see if one thing has modified.
Broad Markets Switch Higher
The SPDR S&P 500 ETF (SPY) moved sharply higher last week sooner than giving up flooring on Friday due to weak tech earnings. Retailers must stay up for a switch in direction of the lower end of its price channel with potential help at R1 ranges of $276.84 or the 50-day shifting widespread at $275.40. Any upside is extra more likely to be capped on the upper trendline at spherical $285.00. The relative energy index (RSI) moved to further affordable ranges of 60.08, nevertheless the shifting widespread convergence divergence (MACD) would possibly see a near-term bearish crossover.
[Examine further about using supplemental technical indicators identical to the RSI and MACD to data your shopping for and promoting approach in Chapter 4 of the Technical Analysis course on the Investopedia Academy.]
Industrials Lead the Methodology
The SPDR Dow Jones Industrial Widespread ETF (DIA) moved sharply higher last week, breaking by the use of R1 resistance at $250.74 in direction of the upper end of its price channel. Retailers must stay up for an ongoing rally to larger trendline and R2 resistance at $259.07 or a switch proper all the way down to retest R1 help at $250.74. Having a look at technical indicators, the RSI stays near overbought ranges at 65.85, nevertheless the MACD stays in a bullish sample after simply recently surpassing the zero line.
Tech Stocks Look Bearish
The Invesco QQQ Perception (QQQ) broke out from larger trendline and R2 resistance at $181.74 last week sooner than shifting sharply lower on Friday following bearish earnings bulletins from Fb and Twitter. The false breakout would possibly signal further draw again for the index as a result of it exams R1 help at $176.70. A breakdown from these ranges would possibly lead to a switch to lower trendline and 50-day shifting widespread help at spherical $174.54. Whereas the RSI is neutral at 51.33, the MACD would possibly see a near-term bearish crossover, signaling further draw again head. (See moreover: Fb Set to Drag Tech Stocks Lower.)
Small Caps Give Up Flooring
The iShares Russell 2000 ETF (IWM) was one among many strongest performers of the 12 months, nevertheless the breakdown from key trendline and 50-day shifting widespread help at $165.62 would possibly spell trouble ahead. Retailers must stay up for an ongoing switch lower to S1 help at $160.04. If the index rebounds from the pivot stage, retailers must stay up for a switch to retest R1 resistance at $167.95. Having a look at technical indicators, the RSI appears barely oversold at 44.76, nevertheless the MACD stays in a bearish downtrend that may very well be accelerating. (For further, see: Commerce Battle Threatens Small-Cap Stock Juggernaut.)
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