Stock Market Update For The Week Ahead: 'A New Expansion'

Last Week In A Nutshell

What Happened: The U.S. stock market “is discounting a new expansion phase of the economy at the same time as a major recession has only just begun,” said Kevin Smith, Crescat Capital’s chief investment officer.

Remember This: “The survey-type releases next week are going to be extremely important,” said Shawn Cruz, manager of trader strategy at TD Ameritrade Holding Corp. AMTD.

“It’s not just the headline itself, a lot of these survey types of releases have a component where they ask about future expectations. And that really to me is what’s driving optimism in the market, the expectation that things will improve in the future.”

Pictured: Profile chart of the S&P 500 E-mini Futures. 

Technical: Mixed messages came after equity indices broke the short-term, momentum-driven uptrend and corrected on June 11. Overall, the island of balance left behind, after the market sold off, is still intact and will offer resistance on upward auctions.

If the market trades through that area, then sentiment has changed and the initiative activity that drove prices lower is no longer present.

Recapping Last Week’s Action: Monday displayed a rejection of lower prices after overnight activity started off weak, on a gap down, but quickly corrected into the regular trading session, going higher through the $3,000 S&P 500 level.

Tuesday’s trade blew through most of the resting offers overnight, into a low-volume area and on a record increase in U.S. retail sales. Later on, after a choppy open, the market established good excess on the lower extreme, and pinned near the $3,100 level.

Wednesday and Thursday’s action was fairly muted as the market continued digesting the upward correction going into Friday’s simultaneous expiry of options and futures tied to index products.

Despite gapping to the high end of the week-long balance overnight, Friday’s trade was volatile and lacked conviction to continue into the resting liquidity at and above the $3,135 area.

Putting everything together, the picture points to the potential for a volatile week ahead.

With the removal of S&P open interest, gamma — the sensitivity of options to changes in underlying price — imbalances and hedging activity could heighten volatility. If liquidation continues into the coming week and value moves lower, then the near-term bullish narrative is no longer intact.

Scroll to the bottom of this story for non-profile charts.

Key Events: Existing Home Sales; National Activity Index; Building Permits; PMIs; New Home Sales; Home Prices; Q1 GDP; Durable Goods; Trade Balance; Trade Inventories; Initial Claims; Continued Claims; Personal Income; Personal Consumption; PCE; UoM Sentiment June Final.

Fundamental: Mortgage applications jumped for the 11th week in a row.

Traffic at supermarkets and merchandise stores was near normal.

Oil prices will average less than $60 to ensure production.

The U.S. and Canadian oil and gas rig count fell to record lows.

On June 26, Russell will enact a record index reconstitution.

China stressed as repo rates and yields climb, liquidity thins out.

Fed shifts away from bond ETFs to a special, diversified index.

ECB’s boost to pandemic bond buying isn’t enough.

No indication BOE will renew its asset-purchase program.

Companies to ditch revenue focus, hone in on market share growth.

Facebook Inc FB acquired a mapping technology company.

Square Inc SQ acquired a Spanish P2P payments app.

Apple Inc AAPL closes stores due to resurgence of COVID-19.

Kroger Co KR posts stronger sales, profit amid pandemic.

Unemployment claims decline, but at a slower rate.

Shopper engagement is higher with mobile e-commerce apps.

High-yield downgrades drop from March and April readings.

MIT, Harvard and others on how capitalism will emerge after COVID-19.

Startups focused on saving time and money may thrive.

Walmart Inc WMT, Shopify Inc SHOP partnership a credit positive.

Facebook Inc’s FB Brazil payments service cuts into bank profits.

GrubHub Inc GRUB acquisition a credit negative for U.S. online food-delivery.

EU solvency rule amendments to improve bank capital ratios and support the economy.

No-deal Brexit to compound risks for sectors hit by pandemic disruption.

Americans increased spending while working from home.

France lifts most of its COVID-19 restrictions.

AT&T Inc’s T sale of Warner Bros. would fetch around $4 billion.

USD to weaken as Fed commits to QE infinity.

ARM-based Macs to expand Apple Inc’s AAPL PC market share.

U.S. natural gas extraction efficiency improves, increasing production rates.

Air maintenance firms brace for a 75% sales decline this year.

The U.S. weighs a $1 trillion infrastructure plan to spur the economy back to life.

Loan default rate approaches 4% on imminent energy bankruptcies.

Airports resilient despite pandemic fallout.

Sentiment: 24.4% Bullish, 27.8% Neutral, 47.8% Bearish as of June 20. 

Product Analysis:

S&P 500 E-mini Futures (ES) | SPDR S&P 500 ETF Trust SPY

Nasdaq-100 E-mini Futures (NQ) | PowerShares QQQ Trust QQQ

Russell 2000 E-mini Futures (RTY) | iShares Russell 2000 Index IWM

Gold Futures (GC) | SPDR Gold Trust GLD

Crude Oil (CL) | United States Oil Fund LP USO | Invesco DB Oil Fund DBO | United States 12 Month Oil Fund USL

Treasury Bonds (ZB) | iShares 20+ Year Treasury Bond TLT

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