Stocks Hold Up Better Than Expected

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On Sunday, Greeks voted against a proposal to accept creditors’ demands and thus rejected bailout terms proposed by the eurozone. By a “no” vote of 61.3% their rejection appeared decisive, and yet U.S. stocks were not as badly impacted as some predicted.

The Dow Jones Industrial Average fell just 0.3%, the S&P 500 was off 0.4%, and the normally volatile Nasdaq fell only 0.3%. The Dow Jones Utility Average rose 0.3%, reflecting the normally defensive nature of the group.

Greece wasn’t the only situation that investors had to cope with on Monday. China’s markets were highly volatile with the Shanghai Composite opening 8% higher but closing with a gain of 2.4%. This followed one of the worst weeks in the country’s market in recent memory.

A sell-off in crude oil presented difficulties for owners of energy stocks. West Texas Intermediate (WTI) oil fell almost 8% to a low of $52.48 a barrel, the biggest daily move since February. Energy stocks were the worst-performing group of the S&P 500, down 1.3%.

Stocks fell in Europe as well, but like in the United States, the damage was not as bad as feared. The Stoxx Europe 600 lost 1.2%, and the German DAX was down 1.5%.

The yield on the benchmark 10-year Treasury note fell to 2.3% from 2.4% as the result of a flight to the safety of U.S. government bonds. Gold rose 0.8% to $1,173.20 an ounce.

The sole economic report of note was the ISM non-manufacturing index. It rose slightly in June to 56 from 55.7 in May versus an expectation of an increase to 56.3.

At Monday’s close, the Dow Jones Industrial Average was down 47 points at 17,684, the S&P 500 fell 8 points to 2,069, the Nasdaq lost 17 points at 4,992, and the Russell 2000 was down 1 point at 1,247.

The NYSE’s primary market traded 936 million shares with total volume of 3.5 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, decliners outpaced advancers by 1.7-to-1, and on the Nasdaq, decliners led by 1.4-to-1.

VIX Chart
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The Volatility S&P 500 (VIX), also known as the fear index, is showing declining volatility. The VIX advanced slightly from last week’s close, but only by 1.3%, a fraction of last week’s higher readings. It could just be a lull in an impending storm of new volatility, but it’s worth paying regular attention.

Russell 2000 Chart
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Chart Key

With a slightly oversold MACD and holding at the crucial support line at 1,240 and trendline at 1,247, the Russell 2000 may be due for a bounce — but just a bounce.

A decline to the May closing low at 1,215 is the most likely limited decline that’s now in the picture, but bounces in the Russell 2000 should be traded on the sell side.

USO Chart
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A big breakdown in the United States Oil Fund LP (ETF) (USO) is reflective of the oversupply in crude and the impending entry into the market by Iran due to negotiations with the rogue state. But support at the March low could create a double-bottom, so it’s probably too late to sell black gold if you already own it.

Conclusion

With Greece, China, Iran and Russia still saber-rattling, there are enough bricks in the “wall of worry” to build a major metropolis. After the initial flood of selling has subsided, which could take most of July and August, be prepared to embark on a bargain hunting excursion.

My Trade of the Day provides a good place to look for such stocks. In today’s I review my favorite recommendations from the past month or so, along with some new buy under prices and targets. This list contains stocks that have relatively high value with regard to revenue and earnings growth.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2015/07/daily-market-outlook-stocks-hold-up-better-than-expected/.

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