STTG Market Recap July 16, 2014

Indexes again gapped up at the open and then didn’t do much the rest of the session.  The S&P 500 gained 0.42% and the NASDAQ 0.22%.  The Federal Reserve’s Beige Book found the economy expanding at a modest to moderate pace, with consumer spending up in all of of the Fed’s districts.  No surprise there as it is inline with much of the data over the past few months.

Here are the longer term charts for the indexes; until we see a high volume selloff or a key reversal it is difficult to say anything but all systems go.   We do have a pretty nice support line now defined on the S&P 500 connecting the highs of early 2014 and lows more recently so any breakdown below that trendline that lasts for more than a day or three should be a signal of caution.



Intel (INTC) screamed higher as it forecast third quarter revenue above Wall Street’s estimates late Tuesday.


Intel is the bellweather of the semiconductor group – and regular readers will know we have highlighted that ETF (SMH) a few times the past month as a very strong outperformer.


Also in the large cap space was a big move by Time-Warner (TWX) after CNBC reported it had rejected a $80 billion takeover bid by 21st Century Fox, which confirmed making an offer for Time Warner, but also said the companies were not currently in discussions.


After the bell, eBay (EBAY) reported a 13 percent rise in quarterly revenue and its stock advanced 1% in extended-hours trading.  The jewel in this company remains the Paypal unit.


News was not so happy with Bank of America (BAC) as it fell after reporting a drop of 43 percent in second-quarter profit and a 10-cent miss on earnings per share.


From the divergence between the recent drop in large cap stocks (as expressed via the S&P 500) and small caps could be a bit of a worry:

Both the S&P 500 and small-cap Russell 2000 set 52-week highs five days ago. Since then, the S&P is down less than -0.75% yet the Russell 2000 is down more than -4.0%. Since 1979, this has never happened. There were three times the Russell was down at least -2% – 12/8/03, 1/20/11 and 5/4/11. In 2003, stocks showed great gains for another two months, then temporarily topped out. In January 2011, they climbed for another month then topped out. In May 2011, it marked the top of the market.

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