Isometric opposite black and white arrows connected to a common puzzle piece.
Last week was another mixed week for the stock market, with economic data including the monthly employment report over the weekend keeping both stocks and traders on edge.
Some early economic data, including the ISM manufacturing index, came in weaker than expected, encouraging those hoping for a rate cut. Yields fell through the first four days of the week before surging higher on Friday.
The culprit was the monthly jobs report, which was expected to add 190,000 jobs but actually added 272,000. Stock index futures tumbled and yields soared. Before the report, futures traders had pegged the likelihood of a rate cut in September at 70%. After the report, that probability quickly dropped to 55%.
market
The Nasdaq 100 rose 2.5% last week to hit a new all-time high despite closing lower on Friday. It still leads the way with a 12.93% gain for the year, but the S&P 500 is close behind with a 12.1% gain after posting a 1.3% gain last week. The Dow Jones Industrial Average was the only market to rise last week.
On the downside, the Dow Jones Utility Average was the weakest, dropping 2.8%, followed by the iShares Russell 2000, which lost 2.2%. SPDR Gold Shares had risen at the start of the week but reversed course on Friday, dropping 3.6% on the day.
Invesco QQQ Trust
Invesco QQQ Trust (QQQ) hit a record high of $465.74 and closed at $462.96 after opening at $463. Thus, it closed 2.1% above the ascending 20-day EMA at $453.30 on Friday, forming a cross. The low on May 31 was $443.05 (dashed line) and then $433.65.
As QQQ made a new high last week (line a), the Nasdaq 100 advance/decline line formed a lower high (line b), creating a negative divergence. A break below the previous low strengthens the A/D line support at line c, confirming the divergence. Daily relative performance is back to the recent high and above the ascending EMA, indicating that QQQ is leading SPY.
T&J Watchlist
T&J’s thematic watchlist from Friday’s close shows that 75% of the major stocks in the Nasdaq 100 closed above their QPIvot for the week. On Friday, there were negative 1_HR DTS signals in MSFT, AMGN, META and AVGO. However, I am more concerned about the 3_DTS signals over the coming week, so I will be monitoring this data daily throughout the week.
iShares Russell 2000 (IWM)
Small-cap ETFs such as the iShares Russell 2000 (IWM) captured the market’s attention with a rally in early May. The rally weakened as the month progressed as the uptrend line b was broken last week. The starband is at $198.05 with further support in the $195-196 area.
The negative outlook is supported by the Russell 2000 A/D line being below the WMA since May 22nd.andIt dropped sharply over the weekend, with RS (not shown) dropping to its lowest level for the year, indicating that IWM is still weaker than SPY.
10-Year Government Bond Yield
The 10-year Treasury yield fell below the daily Stark Band on Tuesday, Wednesday and Thursday. The rebound was delayed on Friday due to severe oversold conditions, but the better than expected jobs report provided the right catalyst. The yield closed at 4.441% from a low of 4.245%. The downtrend (line a) is at 4.603%. The daily MACD is negative and the weekly (not shown) is about to turn negative.
This week we have the CPI report on Wednesday morning, the FOMC announcement and press conference in the afternoon, followed by the PPI report on Thursday and the mid-month Consumer Sentiment Index on Friday. The best opportunities arise when the A/D line is trending upwards, which is not the case now, especially with the Nasdaq 100 A/D line diverging.
