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After logging a four-session rally in all three major U.S. indices, U.S stocks fell on Wednesday in a widespread fashion. White House announced further tariffs on Chinese goods late Tuesday, reigniting trade war fears and stirring more volatility in a market landscape that just seemed to cool off from the late-June trade war fears as investors were looking forward to July earnings season. With the newly announced 10% tariffs on another $200 billion worth of Chinese goods, ten out of eleven sectors of the S&P opened in the red while all thirty Dow stocks fell in premarket activity. The new set of tariffs are not scheduled to start for another few months but their impact, along with no scheduled talk between Chinese and U.S. officials, is already having its impact on the market and could continue to do so through July and August as we learn more about the exact details of these tariffs. Savvy investors should continue monitoring my seasonality charts for the path of least resistance.
The recent gains we saw from positive economic data and the nearing of second-quarter earnings seemed to have been undone by recent tariff escalation which continues to be a problematic theme of 2018. Although strong earnings and economic reports continue to support markets, geopolitical fears and action continue to cast uncertainty on market futures. Both sides, U.S. and China, seemed directly headed for a trade war but with the levied set of tariffs amounting to nothing more than that, and their actual impact on companies and consumers still uncertain, it is hard to decipher what, if any, further action will be taken. China, obviously, responded with strong words against these tariffs from their Ministry of Commerce and look to retaliate.
The year-long remedy to the geopolitical dampening of U.S. markets has been strong economic data and reports, and June looks to be no different. Both price-indices and wholesale inventories rose in the month of June. Labor data continued to improve, although unemployment took a slight hit after hitting all-time highs earlier, and big earnings are on the horizon. Citigroup, Chase, and Wells Fargo are due to report Friday and officially kick off earnings season. Next week, earnings of Netflix, Bank of America, and many more will be released, and there should be plenty for investors to digest. Strong earnings can be a good equalizer to the volatility but investors should continue monitoring geopolitical news as a full-on trade war will surely overshadow even the strongest of earnings. As with earlier tariff escalation, it was not only U.S. stocks that took a hit but Chinese and European markets as well. Surprisingly, though most U.S. assets are down today, the dollar has made modest gains, providing some optimism in this new-but-old wave of volatility.
Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows all positive signals. Today’s vector figure of 0.30% moves to 1.22% tomorrow. Today’s data is based on market signals from the previous trading session.
On July 2nd, our ActiveInvestor service produced a bullish recommendation for Netflix Inc. (NFLX). ActiveTrader, included in the Tools and Premium Tradespoon membership plans, is designed for short-term trading.
Trade Breakdown
NFLX opened near Entry 1 price range of $383.38 (± 2.64) on July 2nd and moved through its Target Price of $402.55 in on July 6th, reaching a high of 408.33. The Stop Loss was set at $364.21.
Our featured stock for Thursday is Coca-Cola Co (KO). KO 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 +1.44% in two trading sessions. 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 $44.82 at the time of publication, down 0.33% from the open with a +0.56% vector figure.
Thursday’s prediction shows an open price of $45.07, a low of $45.00 and a high of $45.41.
The predicted close for Thursday is $45.31. Vector figures stay positive tomorrow and drive upward 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.
West Texas Intermediate for August delivery (CLQ8) is priced at $72.40 per barrel, down 2.36% from the open, at the time of publication. Trading sharply lower, oil futures stumbled as Libya concern continue to build and Chinese and U.S. trade escalation shall continue to touch all areas of the market, commodities included. The price drop seems to run counter to what is normally expected of a sharp supply drop, which we experienced the largest one in two years last week.
Looking at USO, a crude oil tracker, our 10-day prediction model shows all negative signals. The fund is trading at $14.61 at the time of publication, down 3.05% from the open. Tomorrow’s prediction sees support at $14.87 and resistance at $15.32. The predicted close for tomorrow is $14.96. Vector figures show -0.10% today, which turns -0.98% in three 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 looks to record back to back losses as it trades lower for the second straight going into the late afternoon. As the dollar stays in the green, expect gold to trade inversely. The price for August gold (GCQ8) is up 0.42% at $1,261.00 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 positive signals. The gold proxy is trading at $117.84, down .92% at the time of publication. Tomorrow’s predicted low is $119.32 and the predicted high is $119.70. The predicted close for tomorrow is $119.44. Vector signals show 0.32% for today, reaching 1.01% in three 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.
U.S. yields look to retreat as prices modestly go up on all long-term bonds. Trade war fears and the recently implemented tariffs on Chinese goods have already and can continue pushing bond prices up and yields down. The yield on the 10-year Treasury note is up 0.03% at 2.86% at the time of publication. The yield on the 30-year Treasury note is up 0.17% at 2.96% 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 positive signals in our 10-day prediction window. Today’s vector of 0.11% moves to 0.04% tomorrow. The ETF is priced at $122.21 at the time of publication, up 0.21%. The predicted close tomorrow is $122.03 with a low and high of $121.87 and $122.16, 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 down 7.91% at 13.64 at the time of publication, and our 10-day prediction window shows mostly all negative signals. The predicted close for tomorrow is 10.35 with a vector of -14.88%. The predicted lows and highs for tomorrow are 10.30 and 11.39, 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.
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