Market Light Weekly Update, July 12th, 2017: Fed Up?

John Dupriest Market Light

Fed up, or fed down? The Chair of the Federal Reserve, Janet Yellen, testified before the House of Representatives today and the market responded enthusiastically.  Midday, the Dow Industrials are up 112 pts, and relatively speaking the S&P 500 and Nasdaq Composite are up even more. The Fed indicated it will reduce its balance sheet going forward, which is seen as a step in the right direction toward “normalization” (whatever that is in today’s world!).

 

Oil is again above the $45 level, and Treasury yields declined (which is seen as a ‘risk-off’ scenario). The 10-year Treasury bond is now yielding 2.32%.

 

The Dog Days of Summer – named for the time of year that the star Sirius in the constellation Canis Major (big dog) is brightest in the heavens is close to being upon us. It was thought in ancient times that the Sirius star’s brightness added to the summer heat. Something has added to the summer heat, which has heretofore placed the market in a sweaty doldrum. On the chart below you can see the range-bound trek the Dow has been in for some time now. At least the range has been high, not far off all-time highs!

 

This past week’s strong relative strength sectors included Rare Earth Metals (REMX), China/India (FNI), Mexico (EWW), Home Construction (ITB, and Bio Tech (FBT). The weaker side (today’s action not included) saw Oil & Gas Services (XES), Natural Gas (FCG), Retail (XRT), Telecommunications (IYZ) and Silver (SLV).

 

The Technical Tea Leaves have steeped a somewhat stronger brew this week: Trend Status has changed to a weak upward trend.  This indicates that an upward trend has started and may continue in this direction.  This is a moderate bullish signal.

 

The up/down volume oscillator has turned positive when the advance/decline oscillator and the exponentially smoothed advance/decline line are already positive.  In this market, this is viewed as a bullish signal that could precede an upward price movement.

 

The advance/decline oscillator has turned positive when the up/down volume oscillator and the exponentially smoothed advance/decline line are already positive.  In this market, this is viewed as a bullish signal that could precede an upward price movement.

 

The advance/decline oscillator has turned positive with volume accumulation already positive.  In this weak upward market this is taken as a bullish signal that prices could continue the upward movement from this point.