The Greek's voted yes to austerity and the rally continues.

Introduction

The Greek's voted yes to the newly inked bailout deal and the rally continue. The Greek news was great, but I think it more the quality of earnings and economic data that moved the market. The Greek news simply removes a fear and has allowed the market to focus on fundamentals like economic trends and earnings outlook.

Regardless the reason equity indices around the world were up in today's session. Asian indices continued their bounce from recent lows but it was the European indices which got the most lift from Greece. European market were also impacted by an ECB meeting. The ECB held rates steady, says downside risks are contained and that it is increasing its support of Greek banks. The DAX and CAC 40 both gained in excess of 1.5%.

Market Statistics

The S&P 500 was indicated higher from the start of the early electronic session and only strengthened through the morning. Jobless claims, better than expected, and earnings, also better than expected, helped to lift the market. At the opening bell the indices moved strongly higher and then drifted upward from there. Early highs were hit by 10AM and then later around 12:30 and 3:45. Market strength continued into the closing bell, leaving the indices at or near their highs for the day.

Economic Calendar

The Economy

Initials claims fell by -15,000 to hit 281,000, last week's figure was revised lower by 1,000. The four week moving average of claims rose slightly to 282,500. This is the second week of declines since hitting a peak last month and brings claims back down near the long term low. On a not adjusted basis claims rose by 13% versus the projected gain of +19.7% and are down -7.2% from this time last year. The biggest gains in claims were in Michigan, New York and California with increases of 9,961, 6,488 and 5,714. New Jersey and Texas led with declines in claims of -3,276 and -2,405. Initial claims remain at low levels consistent with labor market health.


Continuing claims also fell, shedding 112,000 to hit 2.215. Last week's number was revised lower by 7,000 leaving continuing claims just off of its long term low. The total number of claims rose this week, reflecting the June spike in initial and continuing claims. Despite the rise in total claims over the past few weeks they remain near the long term low and at levels consistent with labor market improvement. Compared to last year total claims are down -11%.


The NAHB Housing Market Index and Philadelphia Fed survey were released at 10AM. The NAHB index came in at 60, the highest level in 10 years and flat from last month. Last month was revised up by 1 point from 59 to 60. Current conditions and future expectations both saw increases but traffic remains low. Hurdles faced by the builders include a lack of labor, something my builder friends are all echoing, and a shortage of lots.

The Philly Fed survey showed modest growth in the region but was weaker than expected. The index fell from last month's 15.2 to 5.7 for July. The reading is positive but shows a slow down in general activity, new orders and shipments. Employment remained steady. All but one future indicator rose this month, the future shipment index fell 10 points but was at a 10 month high in June. A recurring theme throughout the report is that manufacturers are seeing higher prices for input costs, not surprising given the strength in PPI and may indicate tomorrow's CPI could be a little hotter than expected.

Tomorrow's big release will be the CPI. Inflation is one of the key factors driving the FOMC. Along with that are Housing Starts, Building Permits and Michigan Sentiment. Housing Starts are expected to see a significant increase, permits are projected to remain flat.

The Oil Index

Oil prices remain volatile and near four month lows. A surprise build in natural gas inventories may have had something to do with it, along with aftershocks from the announced Iran deal. Fighting in Yemen is ongoing but government forces have recaptured the capital city. In other news an oil field outage in the North Sea had WTI and Brent tradingin opposite directions from each other, WTI falling nearly -1.0% in early action, Brent rising more than +1.0%.

The Oil Index gained in today's session, adding about a half percent. Today's action was very quiet, the index traded in a tight range just below the long term trend line. The index has now been trading below the trend line for 9 days and may continue to do so. Support is near 1250 and could be tested in the coming days. The indicators are consistent with support along this level and rolling into a bullish entry signal. This signal is in line with the underlying trend but requires a break above the trend line and moving average for confirmation.


The Gold Index

Gold prices continue to slip. Fed speak and testimony from Janet Yellen, along with economic data, are pointing to an interest rate hike at any meeting. This is strengthening the dollar and putting pressure on gold which is now trading at an 8 month low near $1144. The dollar index has broken out of a triangle pattern and today broke resistance at $97.50 with $100 in the sights. This upside movement is being driven by rate hike speculation and will likely pressure gold lower in the near term. The caveat is that the indicators, while bullish, are incredibly weak leaving my target for the dollar index questionable in the least. Tomorrow's CPI may provide catalyst to push the dollar higher and gold lower if it is one side or the other of the Goldilocks range, not too hot, not too cold.


The gold miners continue their slide as well, the miners ETF GDX fell close to a full percent in today's session. It looks more and more likely that the ETF will reach the $15.72 level and a full retracement of the 2008-2011 bull market, driven by falling gold prices. The indicators remain bearish and pointing to a test of long term support at the long term low. I remain bullish on gold for the long term and view any such test as potential entry point for longer term positions.


In The News, Story Stocks and Earnings

Earnings are rolling in better than expected, which was somewhat expected. Today's list of reports was dominated by the big banks but other important names reported as well. Goldman Sachs, Citigroup and BB&T are three names among the bankers to report. Goldman was able to beat on earnings but charges during the quarter cut earnings sharply and well below expectations. Citigroup on the other hand was able to post top and bottom line beats similar to those seen by the other big banks earlier this week. BB&T was also able to post a small beat on earnings. The news helped to propel the financial sector, one of today's market leaders, to a new high. The XLF Financial Spyder extended its break above resistance and set a new high, gaining close to a full percent in today's action. The indicators are bullish and rising in confirmation of this move with additional upside likely, however, today's candle was rather small and created a gap so a pull-back or test of support at the previous high is also possible.


Dominos Pizza reported an impressive improvement over last year at this time, along with beating this quarter's earnings expectations, but did not inspire buyers. EPS of $0.81 is 21% higher than last year and 4% above expectations. The results were driven by 12% increase in domestic comp sales, a 6% rise in international comp store sales and the addition of 186 new stores. Shares of the stock responded by falling nearly -3% from the recently set all time high.


After hours action was active as well with earnings reports from Ebay and Google and others. Google posted a nice beat on earnings although revenue was a hair light. EPS of $6.99 was $0.20 better than projections. The beat came on increased revenues from click and Youtube ads. Shares of the stock jumped more than 5% on the news after trading higher all day. Class A shares are now trading at an all time high.


The Indices

The indices are bouncing and approaching new highs, in most cases. Today's action was a combination of relief over Greece, positive economic data and earnings. The exception is the Dow Jones Transportation Index which gained less than a quarter point and remains near recent lows. The index is bouncing, but off of corrective levels and is still well below long term resistance levels. Today's action tested one resistance level, near 8,250, coincident with the short term moving average, and were not able to break it. The indicators are moving higher but reflect the near term resistance. If resistance is broken the index could move up by 250 points to next resistance near 8,500 and the bottom of the Nov/May trading range.


The Dow Jones Industrial Average was another laggard in today's session. The blue chips gained only 0.38% compared to the +1% gain posted by the NASDAQ Composite. Today's candle is relatively small but closed near the high of the day, set a new near term high and has only the current all-time high as resistance. The indicators are bullish and on the rise so a test of that resistance is looking likely. A break to a new all-time high would be bullish. Current support targets on a pull-back are the 18,000 and then the short term moving average just below that.


The S&P 500 made a more substantial gain, 0.80%, and is closing in on its all time high. The broad market broke the 2120 level and is now within 6 points of an all-time closing high. The indicators are bullish and on the rise, in confirmation of the trend following move, suggesting that the high will be tested in the least. A break above the current high would be significant and could lead to further upside with targets near 2200.


The NASDAQ Composite was today's shining star. The tech heavy index gained a little more than 1.25% and set a new all time high. Today's candle was not overly large but the long lower shadow is indicative of underlying support in the market. The indicators are bullish and on the rise, in support of this move, and suggest higher prices are on the way. The current signal is up, in line with the underlying trend, with upside targets near 5300.


The Greek storm has blown over and the markets are bouncing. I have no doubt that Greece will reemerge as a center of attention, probably sooner rather than later, but until it does fundamentals should take over direction of the market. So long as fundamentals remain positive the long term trend in the market should remain the same, which is up.

Risks for the market now are the same things giving the market its lift, economics and earnings. If the data cools off, or comes in too hot, and changes expectations for growth and/or the FOMC rate hike time-line it could spark another correction. Earnings could do the same if the season deteriorates or outlook diminishes. At this time I am expecting neither and remain bullish into the long term.

Until then, remember the trend!

Thomas Hughes