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Good morning. In all honesty, had our research report citing the bullish implications of long strings of consecutive up days not hit my desk on Friday, I might have been seen pulling my hair out yesterday. Imagine the frustration of the bearishly inclined after yet another opportunity to knock this market off its high horse was squandered. Instead of stocks succumbing to an overbought condition and some crummy earnings news, the bulls managed to put up yet another “W.”
But for those that make our morning missive a part of their daily routine, yesterday’s lack of a pullback was an indication that the bull train is still on the track. Sure, it wobbled there for a while but while I’ll apologize for mixing my metaphors, as any coach in almost any sport is fond of saying, “a win is a win.”
The bulls were treated to another piece of surprisingly good news yesterday at 10:00 am eastern when it was reported that sales of new homes in the month of June came in much higher than anticipated. The increase of 11% in June, to a 384K annualized rate marked the third straight monthly increase and the largest monthly gain in eight years. In addition, the supply of new homes for sale fell to 8.8 months in June from 10.2 in May. And although the median sales price was down 12% year-over-year, the rest of the report overshadowed this bit of downbeat data.
The bears were heartened, albeit briefly, by the fact that the market quickly gave back the gains from the housing report. Thus, at about 10:30 am eastern time, it looked like the overbought condition might be coming home to roost and/or that traders had grown tired of the economic recovery theme.
But, in keeping with the historical trend (well, so far at least) the dip was bought and after some waffling during the afternoon, the screens were modestly green by the time the closing bell rang. To be sure, a gain of 15 points isn’t exactly something to write home about. But, I do have to admit it is rather impressive that the bulls were once again able to stand their ground.
However, lest anyone think that this game is going to be one-sided from here, let’s remember that the good ‘ol USofA is auctioning off the not-so modest sum of $115 billion in new debt this week. So, while the bulls can take solace in the fact that history is on their side right now, any hiccup in those auctions could cause traders to toss the playbook out the window in a big hurry.
Turning to this morning, once again we don’t have any economic news to report at this point in the day. However, we will get the Case Shiller Home Price index at 9:00 am and then July Consumer Confidence and the Richmond Fed Index at 10:00 am eastern. And in looking at the pre-market activity, it appears the bulls will once again be tested today.
Running through the rest of the pre-game indicators, with the exception of Hong Kong, the major overseas markets are mostly lower but only modestly so. Crude futures are moving down with the latest quote showing oil trading off by $0.79 to $67.79. On the interest rate front, we’ve got the yield on the 10-yr trading higher at 3.68%, while the yield on the 3-month T-Bill is trading at 0.18%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a lower open. The Dow futures are currently off by about 45 points; the S&P’s are down by about 6 points, while the NASDAQ looks to be about 4 points below fair value at the moment.
Regardless of the color on the screen, make every effort to enjoy the day and until next time, “may the bulls be with you!”
David D. Moenning
Founder TopStockPortfolios.com
For more “top stock” portfolios and research, visit TopStockPortfolios.com
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