A slow day for US stocks with prices trading mostly flat once again. Dow 30 gained 0.13% while S&P 500 grew 0.14% on a day which saw Chinese releasing slightly disappointing economic data with US not doing any much better with a much lower than expected Advance Retail Sales print. Jun Advance Retail Sales came in at 0.4%, falling way short of the expected 0.8% and lower than previous month’s 0.6% which was revised lower to 0.5%. Beneath the headline retail sales figure, all other measures failed to meet expectations – Retail Sales Less Auto came in at 0.0% vs 0.4% expected, Retail Sales Ex Auto & Gas shrank by 0.1% amidst expectations for a 0.4% growth, while “Control Group” grew 0.1% vs the expected 0.3%.
It is amazing that both Dow 30 and S&P 500 still managed to clock in gains despite the 2 major bearish news, and even more amazing that bulls are still lapping up US equities when earning season is just round the corner. With this in mind, we are forced to reevaluate the previous assertion that US traders are neutral, and modify it to slightly bullish, which will add resilience and some support even if earning season results turn out to be dismal. Also, it is important to be reminded about global risk appetite which is marginally bullish, with European stocks gaining higher momentum versus the US counterparts. DAX gained 0.27%, while FTSE100 grew 0.65% and Stoxx50 gained 0.44%. It is not surprising to see that the more positive risk appetite is flowing into the US markets as well, which leads to current US market being slightly bullish.
Dow 30 Hourly Chart
From a technical perspective, Dow 30 has yet to achieve a bullish breakout form the consolidation Channel. Currently we are retesting Channel Top, but Stochastic readings suggest that a bearish cycle is currently underway, which favors the holding of Channel Top for a move back towards Channel Bottom. With Asian markets mixed currently – Kospi -0.37%, Hang Seng +0.02%, STI 0.05% and Nikkei 225 +0.73%, there isn’t a strong risk appetite narrative that can aid bulls quest to push higher from here. Even in the case of price breaking Channel Top, bulls should ideally trade above 15,500 in order to establish a rising Channel that mimics S&P 500 for a slight bullish bias.
S&P 500 Hourly Chart
Even though S&P 500 is currently slightly bullish, price is also around Channel Top with Stochastic readings pointing lower, similar to Dow 30. Given the mixed nature of Asian sentiments right now, likelihood of a move towards Channel bottom increases, and due to the correlative nature between these 2 indexes, it is unlikely that one index will diverge in direction. What this imply is this – should either index start to break out higher, the possibility of a similar move in another increases. Similarly, should S&P 500 start to trade towards Channel bottom once more, it is likely that Dow 30 will favor a move back to 15,400.