Market Outlook – 06/10/19
Today’s Market Outlook:
Today, with slightly below-average trading range and volume, the S&P 500® gained more than 13 points – despite closing 18 points off its intraday high.
Of course, the biggest news driving price action today was the U.S. administration’s suspension of potential tariffs on Mexican goods that was announced Friday overnight. This news led to an opening gap last night that was mostly filled in by the open before stocks made another see-saw move up to intraday highs before ultimately closing at intraday lows.
Most of this news was largely expected and was priced into the S&P by the end of last week. As a result, there are multiple technical signs suggesting we may experience a short near-term pullback. The near-term line continued a slow descent out of the upper-reversal zone and may produce a pattern similar to when the S&P bounced off its Christmas Eve lows.
As usual, all the major indexes’ Market Forecast charts appear similar to one another: strengthening bullish intermediate posture with overbought short-term sentiment that may show some weakness as early as tomorrow and/or Wednesday.
Previously, the small-cap Russell 2000® has been underperforming the S&P – to its worst relative level since early 2016. Despite’s today small gain in small cap stocks, the Russell’s intermediate line still has not crossed above the chart’s midpoint yet. In 2016, this pattern led to a strong two years of relative gain in small caps as the U.S. dollar declined.
Another reason for recent positive investor sentiment is the expectation that the Fed will but the fed Funds Target Rate by 25 basis points potentially at July’s meeting with another cut expected by the end of the year. The accompanying drop in the greenback could be another propellant for stocks going into the end of the year.