Market Week in Review July 6 – 9

This weekly wrap will be on the shorter side, since we covered a good bit of the market action during the week. Stocks staged a rally from oversold conditions, with all of the primary indexes gaining 5% or more on the week. The leading SPX sector was the basic materials, with financials also putting in a strong showing. Some of the notable winners were in the fertilizers group, with Mosaic (ticker: MOS) up nearly 17% and Potash (ticker: POT) up nearly 9%. In spite of these sharp gains, a look at the weekly charts reveals that they, like the broader market, remain in a primary downtrend.

Treasury bonds pulled back a bit from the high levels they had reached during the stock selloff, going back to a 3 handle on the 10 year and a 4 handle on the 30 year. The 10 year finished just under the peak of December 2008, when the world appeared to be coming to an end. Investment grade corporates were pretty much unchanged for the week, while lower grades caught a bid with the renewed appetite for risk, gaining a little over 2%.

The US Dollar fell for a fifth consecutive week with the euro taking the other side of the trade, gaining 5%+. Energy futures were a mixed bag, with oil and natural gas heading in opposite directions: the former up and the latter down, each by about 6%. The drop in natural gas looks like it may threaten the emerging up trend that I have been writing about in recent weeks.

The coming week will start to bring Q2 earnings reports, which will drive stocks and probably the rest of the markets as well. The technical picture is what we saw in the chart on Thurday’s post: the SPX remains in a down trending price channel, with momentum and volume tailing off as the week’s advance went on. It doesn’t look like a new bull move, at least not yet. Energy and commodities do look more interesting, and may have put in an intermediate term bottom, but it seems aggressive to make a trade here. My bias remains defensive going into earnings season.

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