This week saw a sizable dip in the equity futures in the overnight session before Tuesday's open with the S&P 500 (ES)down 50 handles. However, the dip-buying trend continued as the ESU18 restored its lost ground. Meanwhile, the Russell 2000 (RTY) and Nasdaq (NQ) futures went on to make new all-time highs. All of this rebounding took place in spite of the escalating trade war and Trump announcing ideas about new tariffs.
Next week is the final trading week of June, and we will provide an update of our end of the month view on Wednesday. For now, it appears that dip-buyers remain in control, especially as many funds are positioned bullishly going into the Q2 earnings reports to begin in early June.
Overnight, the Asian and European equity markets have been weak. The ESU18, which had rallied modestly in the overnight session, then dropped 22.50 handles but has since regained a small portion of those losses.
The calendar today is busy but offers nothing that we expect to be market-moving. Meanwhile, two noteworthy meetings include a critical OPEC meeting and a Bank of England meeting, but these probably won’t affect U.S. equities; and the calendar is exceptionally light tomorrow.
We reiterate the formula that we have been abiding by - that price action shows that we are in a dip-buyers market. In addition, the seasonals have reflected a declining volume and generally tighter ranges. As long as Europe doesn’t experience a new wave of selling approaching the 11:30 a.m. EST close this morning, we are expecting higher prices in the U.S. equity markets going into tomorrow.
We expect Friday to be a quiet session since it is the first official Friday of summer with no effective economic calendar. This will likely motivate many funds managers to take care of business today and head out tomorrow to enjoy a three-day weekend.
The economic calendar does pick up early next week, featuring Monday’s New Home Sales and Tuesday’s Consumer Confidence as the month of June starts to wind down.
The chart of the ES above indicates our buy zone from 2767 to 2757 in blue. We will watch the technical patterns inside this zone for our entries. Our initial target is yesterday’s close at 2771.75, where we will take off some of our profit and likely move a stop up to minimize risk. After that, we would target the yellow band at the top of the chart, which includes today’s overnight high of 2785.25 and this week’s 2786.75 area, as we approach the end of the week.
Today’s Economic Calendar:
- Weekly Bill Settlement
- Jobless Claims 8:30 AM ET
- Philadelphia Fed Business Outlook Survey 8:30 AM ET
- Neel Kashkari Speaks 9:00 AM ET
- FHFA House Price Index 9:00 AM ET
- Bloomberg Consumer Comfort Index 9:45 AM ET
- Leading Indicators 10:00 AM ET
- EIA Natural Gas Report 10:30 AM ET
- 3-Month Bill Announcement 11:00 AM ET
- 6-Month Bill Announcement 11:00 AM ET
- 2-Yr FRN Note Announcement 11:00 AM ET
- 2-Yr Note Announcement 11:00 AM ET
- 5-Yr Note Announcement 11:00 AM ET
- 7-Yr Note Announcement 11:00 AM ET
- 30-Yr TIPS Auction 1:00 PM ET
- Fed Balance Sheet 4:30 PM ET
- Money Supply 4:30 PM ET
- PMI Composite Flash 9:45 AM ET
- Baker-Hughes Rig Count 1:00 PM ET