The market tread water today as we wait on news from Greece, the Iranian nuclear deadline, next week's round of data and the start to earnings reporting season.

Introduction

Global markets continue to be skittish over Greece as we wait for data and earnings. No new news has yet appeared but something is expected to be announced at just about any minute; the deadline for an IMF payment is only 5 days away so we are at a turning point in the story. Asian indices felt the fear worst, falling more than a half percent on average in response to yesterday's sell-off in Europe and here at home. The mainland Chinese Shang Hai index led declines in Asia, fueled by recent volatility, shedding more than -3.5%. European indices were under pressure as well but were able to maintain break-even levels for the most part.

Market Statistics

Futures trading indicated a positive open for the US market from the start of the early pre-opening session. The trade wasn't strong but it was positive and held through until the open. Economic data released this morning was better than expected and helped to support prices along with a mid-morning announcement from the Supreme Court. The court ruled 6-3 in favor of Obamacare subsidies on the federal exchange and sent the healthcare sector trading upward. The major indices held their gains for most of the day but did not form a noticeable rally. By late afternoon the bulls threw in the towel, allowing the indices to fall to break even and lower. Daily low was hit near 2:30 at which time a bounce occurred which carried the market sideways and into the close.

Economic Calendar

The Economy

Personal Income and Spending both rose more than expected. Income rose by 0.5% on top of a +0.1% revision to last month while spending rose by 0.9%, also on top of positive revision. PCE prices rose only 0.1% at the core level, in line with expectations. These income and spending numbers are consistent with current labor market trends and expectations 2nd quarter GDP isn't as bad as first predicted.

Initial claims rose by 3,000 from an upward revision of 1,000 to 271,000, just below expectation. The four week moving average of claims fell by -3250 to 273,750. On a not adjusted basis claims rose by 1.7% versus an expected gain of only 0.6%. Not adjusted claims are now -14% lower than this time last year. Initial claims remain in long term down trend and at levels consistent with labor market health. Pennsylvania and Florida reported the largest increases in claims, +6007 and +1063, while California and Tennessee reported the largest declines, -2592 and -1889.


Continuing claims rose as well, gaining 22,000 to hit 2.247 million. This is on top of a +3,000 revision and is a relatively flat move from last week's headline. The four week moving average also rose, adding just over 5,000. Continuing claims is just off of the long term low, has been fairly stable for the last month and is consistent with ongoing labor market health.

Total claims fell this week, dropping -40,915 to hit 2.101 million. This drop may indicate the spike in initial and continuing claims seen in May has not resulted in an increase in long term unemployment. Total claims are just off the long term low and remain consistent with recent labor trends and ongoing health in the market. The next round of ADP, NFP and unemployment figures are due out next week. Projections are in the range of 200,000-250,000 for NFP, unemployment is expected to remain steady.


The Oil Index

Oil prices remain trapped in a range around $60 for WTI as high supply and tepid demand are off set by Greek fear and fast approaching Iranian nuclear deal deadline. WTI fell more than -1% to trade near $59.60 with Brent hovering around $63. The deal with Iran is still highly questionable in terms of its fruition but could add as much as 600,000 barrels per day to world markets. In the mean time ISIS has ramped up fighting in Syria and the Yemen conflict wears on. Peace talks between rival parties broke up after only a day or two and did not produce positive results.

The Oil Index fell in today's session, losing about -0.79%. The index remains within the June trading range with resistance near 1,350 and support above the long term trend line near 1,300. The indicators remain consistent with a trend following entry although geopolitics may keep the index, and oil prices, range bound. Based on the latest stance taken by Iran it is not looking like a deal will be reached by next week which could have a positive affect on oil prices as supply outlook would be diminished.


The Gold Index

Gold prices held steady near the bottom of the three month range, just above $1173. Prices are down on dollar strength and uncertainty over Greece but have yet to break support. Support could be tested, with a possible move to the long term low near $1145, but long term inflation outlook remains positive so any downside is likely to be muted and result in buying opportunities. Looking to the global picture in India easing import restrictions have helped boost demand while analysts say falling stock prices in China could spark renewed demand for gold there.

The gold miners traded to the downside and continue to test support. The miners ETF GDX lost about -1.0% in today's session, creating a small bodied candle just at the intersection of my support line and rising trend line, near $18.20. This intersection could become a crucial juncture as there are growing signs of support despite golds persistence in trading near the bottom of its range. The indicators are the most telling, divergence in MACD and a recent bullish crossover of %D on stochastic has the sector set up for a snap-back rally at least, and a trend following entry at best. While gold prices are the ultimate driver of this sector earnings may play a part in the coming weeks.

I see a chance for the miners to show earnings growth with a chance for positive surprise. They have, as a group, been reporting increases in production for several quarters that up until this past quarter have been offset by falling gold prices.


In The News, Story Stocks and Earnings

Lots of news today but perhaps the biggest story, ex-Greece, is the Supreme Court decision to uphold Obamacare subsidies. The 6-3 ruling says the subsidies are necessary for the exchange system to function. Healthcare stocks across the board were lifted, led by service providers. The news also sparked renewed speculation of consolidation within the healthcare sector. Humana's stock was actually halted briefly after experiencing high volume and volatility following a report Aetna was close to acquiring the company. The Healthcare Service Provider Spyder gained over 2% and closed near the all-time high.


Micron Technology reported after the bell and missed on the top and bottom lines. The company missed earnings and revenues by narrow margins citing headwinds in the PC sector. For some reason the stock traded higher immediately after the report was released but the positive vibe did not last and the stock quickly fell more than -7% to set a new 12 month low. Forward outlook is weak and below consensus estimates.


Nike also reported after the closing bell. The sports wear giant beat on the top and bottom lines, and on future orders, sending its shares higher to stay. EPS of $0.98 is $0.15 ahead of consensus, new orders are up 13%, 2% better than expected. The one negative was a significant impact to sales/earnings attributable to strong dollar. Shares climbed 1.5% in after hours trading.


Barnes & Noble reported quarterly losses narrowed from the year ago period but still fell short of estimates. Revenue in the quarter fell 10% with declines seen in all segments. Aggressive cost savings are the only reason why the report was not worse. Shares of BKS lost more than -1.5% to trade in wide range and create a long legged doji above the short term moving average.


The Indices

Trading was relatively quiet today. There was some churn to trading that left the indices near their lows for the day but losses were light in the face of the annual rebalancing of the Russell indices tomorrow. Today's action was led by the Dow Jones Transportation Average's loss of -0.84%. The transports continue to lag the broader market and may gearing up for a deeper correction despite my optimistic views of the future. The index set a new 8 month low today and closed below my support target at 8,250. This move is a not definitive break of support but does put the index in position for such a move should support not materialize. The indicators confirm a test of support at least, MACD is in process of making a bearish crossover with stochastic rolling over in line with a bearish crossover of its own.


The Dow Jones Industrial Average fell -0.41% and looks to be retreating to a stronger support level. Today's action created a small bodied black candle for the blue chips but confirmed yesterday's break of the short term moving average. The indicators are also rolling over, consistent with a near term peak. The long term trend remains up so this dip will be another potential buying opportunity. Downside target is near 17,750 with resistance at 18,000. In the short term the index is still winding up within its recent trading range with bullish long term outlook.


The NASDAQ Composite made the smallest decline in today's session, -0.20%, yet remains above the short term moving average. The tech heavy index continues its retreat to support, target the moving average, with indicators consistent with a near term peak. Bullish MACD is in retreat but not yet crossing the zero line; stochastic %K is moving lower while %D is moving higher. The index appears to be trending higher with no sign of major reversal.


The S&P 500 fell -0.4%, dropping below the short term moving average but halting its fall just above 2100. Both MACD and stochastic are consistent with a near term peak and could lead to further testing of support. The index remains inside a 3-4 month trading range and impacted on a day to day basis by news. The long term trend remains up as does economic and earnings outlook so this dip is most likely to result in another buying opportunity for the bulls.


Tomorrow could be a volatile day, not only is it the last feasible day for Greece to reach a deal before defaulting it is the annual rebalancing of Russell indices and the second to last day of trading for the first half of 2015. Economic data is light, only Michigan Sentiment is on the list. Market action remains tight and winding up within recent trading ranges. The long term trends remain up, save for the transports, so I remain bullish.

Earnings season will likely be the turning point for any major moves, in either direction, with plenty of near term events to drive day to day trading. Greece is going to be number 1 on my list for the next few days with Iran and the nuclear deal coming in a close second. After that we have a big round of data due out next week including ADP, NFP and unemployment that could easily add volatility, especially if it leads traders to fear a rate hike surprise.

Until then, remember the trend!

Thomas Hughes