The stock market managed to survive a series of key economic reports without collapsing, with the better-than-expected CPI report pushing yields lower and stocks higher. The data supports a deflationary trend, with rising unemployment claims indicating a slowing economy. The upcoming PCE report on July 26 and new earnings season will provide further insight into inflation and separate winners from losers.
Last week, the iShares Russell 2000 ETF was a top performer, showing positive year-to-date performance after a 6.1% increase. The Dow Jones Utility Average also saw a 4.2% increase, but only has single-digit YTD performance. The Dow Jones Industrial Average and Dow Jones Transportation Average both rose by 1.6%, with the latter still showing negative YTD performance. The S&P recorded a small gain of 0.9% while the NASDAQ 100 index closed the week down 0.3%. The SPDR Gold Shares had a YTD performance of 16.7%.
The NYSE Composite saw over four times as many advancing stocks as declining stocks last week, with strong numbers also seen on the Nasdaq Composite. Despite warnings of a potential market decline based on divergences between weighted and unweighted advanced decline lines, there were no major divergences between the unweighted Advance/Decline lines and the unweighted S&P or NASDAQ 100 ETFs.
The NYSE Composite outperformed other major averages last week, reaching the upper boundary of its trading range. The NYSE Stocks Only Advance/Decline line rose sharply, still positive above its rising EMA. The NYSE All Advance/Decline line broke above its May high and resistance, indicating a bullish breakout. The Spyder Trust (SPY) closed slightly below its highs, with resistance at $566.71 and $567.73.
The unweighted S&P 500 advanced decline line broke its downtrend, though is extended on a near-term basis. The NASDAQ 100 Advance/Decline and Dow Jones Industrial Advance/Decline lines made new highs, with the Russell 2000 Advance/Decline line lagging. The Financial, Industrial, and Materials Sectors all showed new positive WK_DTS signals, suggesting a move higher.
Overall, the market is showing positive technical patterns with more stocks and ETFs displaying positive volume and RS analysis. As Advance/Decline lines trend higher, the risk on the long side of the market should decrease significantly. The tragic events over the weekend may create uncertainty for stock investors in the upcoming week, impacting market trends.
