Markets Break From Trade and Growth Worries, Look to Economic Data

May 30, 2019
By Vlad Karpel

U.S. markets are reaching for a recovery session today as investors react to positive first-quarter GDP data for the U.S. economy. Those keen on keeping tabs on the ongoing trade dispute will get a reading on May’s purchasing manager’s index from China’s Federation of Logistics and Purchasing. As of now, other indicators available for analysis seem to be suggesting that this index will reflect a contracting manufacturing sector in China. If this bears true, global growth fears will likely take hold again and may put more pressure on reaching a deal. Chinese Vice Foreign Minister Zhang Hanhui used the term “naked economic terrorism” in reference to U.S. tariffs and trade sanctions, again keeping rhetorical tension high between the two economic superpowers.

A recent bond rally had exacerbated the inversion of the yield curve between the 10-year and 3-month, reviving recession fears. Today’s trading has seen treasury prices drawing down and yields climbing back up, however, and some are pointing to the rally as fear-based trading that was overblown and will correct. In early Thursday trading, the 10-year note traded up 1.6 basis points at 2.25%.

For the first time since its IPO, Uber Technologies Inc. (UBER) is set to publish quarterly earnings today. Attention will be centered here as the newly floated symbol has not managed to trade above its initial pricing level of $45 yet. In other corporate news- we’re seeing positive reporting from both Dollar General Corp (DG) and its rival Dollar Tree Inc. (DLTR) and both stocks are trading higher at the time of publication. Palo Alto Networks Inc. (PANW) posted first quarter earnings beats but the stock is falling today on news that second earnings will be dampened by several acquisitions made by the cybersecurity firm. Apparel retailer Express Inc. (EXPR) saw a 1% gain in early Thursday trading after posting a first quarter loss that was much less than analyst expectations.

In economic news- we’re seeing slightly lowered initial estimates for first-quarter GDP growth from The Commerce Department at 3.1% instead of a previous 3.2% reading. We also saw a government-issued estimate of the trade deficit in April of $72.1 billion. This is above March’s estimate of $71.4 billion and below expectations of $72.9 billion. New applications for jobless benefits were within economist expectations, rising to 215,000 for the week ended May 25. Pending home sales figures were released today, showing a 1.5% drop from April to March.

Overall, many investors are still in recovery mode and others are out hunting for deals, and economic data will need to be weighed against continuous developments and headlines around trade and growth concerns in order to establish some footing in this volatile market landscape.

The market broke the $280 support level for SPY and tested its 200 day MA at $278. As long as the market trades below the 50 days MA ($286), expect elevated volatility. We still believe the market is trading in the last stage of bull market and the $278 level will hold short term.We encourage our readers to avoid chasing the market near $290 but consider buying near $280. However, if the market breaks its $290 resistance, we expect the market to rally to $300 in the next 30-60 days.

For reference, the SPY Seasonal Chart is shown below:

 

 

Using the “^GSPC” symbol to analyze the S&P 500, our 10-day prediction window shows near-term neutral/negative signals. Today’s vector figure of +0.27% registers as neutral and the average vector weighting for the 10-day forecast is to the downside. The index is trading between today’s predicted low of 2,778.91 and predicted high of 2811.75. Prediction data is uploaded after the market close at 6pm, CST. Today’s data is based on market signals from the previous trading session.


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Highlight of a Recent Winning Trade

On May 28th, our WeeklyTrader service produced a bearish recommendation for Gamestop Corp. (GME). WeeklyTrader is available as a standalone subscription service or included in Tradespoon’s Elite Trading Circle membership plan. WeeklyTrader is designed for 2-5 day positions for stocks and single options.

Trade Breakdown

GME entered its forecasted Strategy B Entry 1 price range of $7.82 (± 0.08) at market open on Monday, 5/28 and hit its Target price of $7.66 in the second hour of the trading session on Thursday, 5/29. The Stop Loss price was set at $7.98.


Friday Morning Featured Symbol

*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 MonthlyTrader recommendations. If you are interested in receiving Vlad’s personal picks,please click here.

Our featured symbol for Friday is Barclays iPath S&P 500 VIX Short Term Futures ETF (VXX).VXX is showing positive outlook in our Stock Forecast Toolbox’s 10-day forecast, according to our Range Trend meter. This stock is assigned a Model Grade of (C)indicating it ranks in the 50th percentile for accuracyfor current-day predicted support and resistance, relative to our entire data universe. Stay tuned for more direction in our next Market Commentary issue as this symbol will be sensitive to changing news and developments.

The stock is trading at $29.14 at the time of publication, down 2.00% from the open with a -0.71% vector figure.

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 the next trading session relative to the average of actual prices for the 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

Oil futures are seeing some sideways movement today as investors parse recently released data from the American Petroleum Institute and anticipate today’s release of data from the Energy Information Administration. API data showed U.S. crude supplies drew down by 5.2 million barrels for the week ending May 24, but also signalled a gasoline stockpile increase of 2.7 million barrels and a distillate supply drop of 2.1 million barrels. Trading in this sector will be most likely choppy until the next round of EIA data which can help find some direction after investors were hit with geopolitical uncertainty and global growth concerns in headlines.

West Texas Intermediate for July delivery (CLN19) is priced at $58.75 per barrel, down 0.27% from the open, at the time of publication.

Looking at USO, a crude oil tracker, our 10-day prediction model shows near-term neutral to bearish outlook. The fund is trading at $12.24 at the time of publication, down 0.30% from the open. Vector figures show +0.22% today but turn to a more negative trend in the near-term. The symbol is trading around its predicted support for today at the time of publication. 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

Gold prices are seeing some tepid swinging today as investors weigh an equity market recovery in progress against ever-present fears of U.S/China trade issues and global economic vitality.

The price for August gold (GCM19) is up 0.37% at $1,285.60 at the time of publication.

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows overall neutral vector signals- reflected by the Range Trend meter. The gold proxy is trading at $121.47, up 0.50% at the time of publication. Vector signals show -0.11% for today- which also registers as a neutral signal. 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

The rally in bond prices which drove yields lower and stoked recession fears seems to have abated today, with yields pushing back higher and bond prices retreating. The yield on the 10-year Treasury note is down 0.77% at 2.24% at the time of publication. The yield on the 30-year Treasury note is down 1.06% at 2.66% at the time of publication.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for long-dated bond prices in our Stock Forecast Tool, we see positive near-term signals. Today’s vector of +0.08% registers as neutral but grows to +0.55% in three sessions. Investors should keep tabs on headlines and changes in bond buying and selling activity as new economic data is released. 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

Volatility has dampened today as U.S. markets take a breather from the eluge of headlines and fear-based trading on Wednesday. With a raft of economic data released today and more upcoming, investors will be handling this data and using it to make more informed gauges on the health of the global economy.

The CBOE Volatility Index (^VIX) is down 2.51% at $17.45 at the time of publication, and our 10-day prediction window shows a mixed/positive near-term outlook. The predicted low/high for today is 17.36 and 18.64 with a vector of -1.35%. 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.


Memorial Day extended discount offer expires midnight tonight:

PERMANENT UNLIMITED ACCESS!

  • Subscribe now for less than the cost of one year at the regular rate!
  • With 36 month trailing gains of 1,230%, and an 75% win-rate, a lifetime Membership could easily turn $100,000 into $1,330,202 and if the next few years are as good as the last 36 months even. . . $2.000,000. . .$5.000,000 or more.
  • Tradespoon Premium Service is the only trading system you’ll ever need for timely buy/sell trading calls.

No way this offer will ever be repeated! Prices are going up significantly next week!

Click Here to Learn More 


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