Another Major 2018 Selloff Could Be Remedied by Fresh Economic Data

After logging one of its worst weeks since the start of 2018, The Dow Jones continues to falter, dropping another 400 points today. Further trade threats by President Trump seem to be taking their toll on the market as all three major U.S. indices are in the red today. Similarly, S&P, Dow, and Nasdaq futures are all moderately down. Markets have certainly faced better days but as we’ve seen in 2018 more than once, the market can surely bend but does not break. With major selloffs in early February and late March, all occurring near similar headline-grabbing conflicts and events, the market has been able to rebound fairly well and for the most part remains in the green for 2018. With this last selloff, I recommend traders look to sell into the rallies and buy into the dips. Monitor 50-day moving averages and use my Seasonal Charts to pinpoint optimal entry and exit positions.

After Trump asked Congress to identify $200 billion worth of Chinese goods to place tariffs on last week, markets slumped and once again brought trade tension between U.S. and China to a new high. To add fuel to the fire, over the weekend Trump announced another set of threats in the form of tariffs, this time aimed at European cars entering the U.S., as a response to the recently implemented tariffs on U.S. goods from the European Union. The tariff-off has surely worn out markets and taken its toll on buyers as we are in the midst of another large selloff but looking into past selloffs, investors should carry some optimism in the American economy which has been able to rebound from similar instances. Globally, markets have not fared well last week as both European and Chinese markets traded lower, while, surprisingly, both the dollar and gold also finished lower.

A good start to the rebound could come in the form of positive economic data, which has helped in the past and we’ll look to help now also. We will receive consumer confidence and housing index reports today while home sales and further trade data to will be made available tomorrow. The week in economic data releases will finish with a report on consumer sentiment on Friday. This week will also lend a large handful of Fed Official speeches as Dallas, Atlanta, Boston, and St. Louis Fed Presidents are all set to speak throughout the week while Fed Vice Chairman Randal Quarles will deliver a speech on international bank regulation on Wednesday. These events will surely shed light on future monetary policies and market outlook and will be good indicators of how American markets are handling the selloffs and volatility.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows mostly negative signals. Today’s vector figure of -0.02% moves to -1.21%in four trading sessions before going further into negative territory. Today’s predicted support and resistance levels are 2,729.81 (±5.08) and 2,743.37 (± 5.10), respectively. The predicted close for tomorrow is 2,723.96. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.  

Highlight of a Recent Winning Trade

On June 21st, our ActiveTrader service produced a bullish recommendation for PPG Industries, Inc. (PPG). ActiveTrader, included in all paid Tradespoon membership plans, is designed for intraday trading.

Trade Breakdown

PPG entered Entry 1 price range of $104.46 (± 0.49) in its second hour of trading and moved through its Target Price of $105.50 in its second to last hour of trading the following day. The Stop Loss was set at $103.42.

Tuesday Morning Featured Stock

Our featured stock for Tuesday is  Dr. Pepper Snapple Group, Inc.  (DPS). DPS is showing a confident uptrend in our Stock Forecast Toolbox’s 10-day forecast. This stock is assigned a Model Grade of (B)– indicating it ranks in the top 25th percentile for accuracy for predicted support and resistance, relative to our entire data universe.  Our 10-day prediction model shows positive vector figure reaching +1.28% in four trading sessions which then incrementally builds throughout the 10-day forecast. Our benchmark for vector figures is +1.00%.

*Please note: Our featured stock is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services.  If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader or ActiveInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.

The stock is trading at $122.24 at the time of publication, down .11% from the open with a +0.10% vector figure.

Tuesday’s prediction shows an open price of $122.95, a low of $122.38 and a high of $124.31.

The predicted close for Tuesday is $122.89. Vector figures stay positive and drive throughout the 10-day forecast. This is a good signal for trading opportunities because we use vectors as a primary factor in determining price movements for stocks and ETF.

Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Note: The Vector column calculates the change of the Forecasted Average Price for next trading session relative to the average of actual prices for last trading session. The column shows expected average price movement “Up or Down”, in percent. Trend traders should trade along the predicted direction of the Vector. The higher the value of the Vector the higher its momentum.

Oil

U.S. and Brent oil prices both look down today as a result of the OPEC agreement, spearheaded by Russia and Saudi Arabia, to increase global oil production by 1 million barrels a day. After holding back OPEC and key non-members output throughout most of 2017, the increase in output is scheduled to begin next month. West Texas Intermediate for August delivery (CLQ8) is priced at $65.52 per barrel, up 0.69% from the open, at the time of publication.

Looking at USO, a crude oil tracker, our 10-day prediction model shows almost all negative signals. The fund is trading at $13.81 at the time of publication, down 1.50% from the open. Tomorrow’s prediction sees support at $13.90 and resistance at $14.38. The predicted close for tomorrow is $13.90. Vector figures show 1.42% today, which turns -2.94% in four trading sessions.  Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Gold

The strange trend of gold trading lower alongside a sliding dollar continues as both the commodity and U.S. currency look to finish lower for the day. With major tariff talk and increased geopolitical risk, gold continues to not be treated as the safe haven it has been in the past. The price for August gold (GCQ8) is down 0.19% at $1,268.50 at the time of publication.

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows all negative signals. The gold proxy is trading at $120.0109, down 0.27% at the time of publication. Tomorrow’s predicted low is $119.83 and the predicted high is $120.37. The predicted close for tomorrow is $120.06. Vector signals show -0.05% for today, reaching -1.67% in five trading sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.  

Treasuries

Bond yields traded lower as prices for U.S government bonds rose. Recent Treasury Department plan to de-incentivize Chinese ownership in U.S. technology firms alongside preventing technological exports into China from the U.S. signals further trade war escalation but also preventative measures by the U.S. government. The yield on the 10-year Treasury note is down 0.85% at 2.87% at the time of publication. The yield on the 30-year Treasury note is up 0.49% at 3.02% at the time of publication.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see mostly negative signals in our 10-day prediction window. Today’s vector of -0.02% moves to -0.45% in three trading sessions. The ETF is priced at $120.83 at the time of publication, up 0.25%. The predicted close tomorrow is $119.93 with a low and high of $119.59 and $120.79, respectively. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Volatility

The CBOE Volatility Index (^VIX) is up 30.07% at 17.91 at the time of publication, and our 10-day prediction window shows all positive signals. The predicted close for tomorrow is 16.16 with a vector of 0.90%. The predicted lows and highs for tomorrow are 15.17 and 16.53, respectively. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.