Stocks rebounded Tuesday from the declines of Friday and Monday. The Dow Jones Industrial Average was up 0.1% and the S&P 500 gained 0.3%. But the final tally for the quarter is Dow -0.9% and S&P 500 -0.2%. The Nasdaq rose 0.6% on Tuesday with the index up 1.8% for the quarter.
Early selling was the result of Greece’s recent bailout offer being rejected by the European Union until after the results of a July 5 referendum are known. However, stocks rallied in the afternoon when a report surfaced that eurozone finance ministers would reconsider an offer from Greece if a referendum was cancelled. So it appears that the new offer will be considered by the IMF this morning. Germany’s DAX fell 1.3% and France’s CAC 40 lost 1.6%.
Closer to home, a crisis appears to be brewing from the island of Puerto Rico. Puerto Rican bond interest payments are due today, and the government may default on their debt. Investors, however, appear to be covered by bond insurance despite the governor’s call for bondholders to accept losses as part of a debt restructuring plan.
The 10-year U.S. Treasury note fell with the yield rising to 2.35% from 2.33% on Monday.
Gold lost 0.6% at $1,171.50 an ounce. Crude oil futures rose 2% to $59.47 a barrel.
At Tuesday’s close, the Dow rose 23 points to 17,620, the S&P 500 gained 5 points at 2,063, the Nasdaq was up 28 points at 4,987, and the Russell 2000 gained 7 points at 1,254.
The NYSE’s primary market traded over 1 billion shares with total volume of over 4 billion. The Nasdaq crossed 2 billion shares. Higher volumes were due in part to end-of-quarter portfolio adjustments.
Our trusty 17-month moving average (MA) chart is still bullish. But with the index closing June a mere 3.2% above the moving average (red line), there is little room before a sell-off would trigger a sell signal.
At the end of last year, the premium above the MA was a healthy 9.2%. And just before the major sell signals in October 2000 and December 2007, it was over 8%.
A contraction always makes traders nervous despite the fact that experience has shown us that a reversion to a mean (average) is normal in the life of a bull market. However, we are currently facing the historically worst four months of the year for the Nasdaq. Given this and difficult international and economic situations, we have reasons to pause when considering future investments.
Conclusion
Entering orders below the market on stocks you want to own at a discount is an excellent long-term strategy. I’ll continue to feature investments that may be bought at deeply discounted prices during a market sell-off in the Trade of the Day.
We should get a bounce early in July from the inflow of retirement funds. An absence of such a rally would certainly be a negative.
I’ll closely monitor the S&P 500 17-month chart, and if it renders a mid-month signal, I’ll let you know. By following this simple strategy, many of our readers have multiplied their returns over investors who just bought and held.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
