Not only are trade talks “back on track” … so is this market. The S&P 500 finished the first-half of 2019 with a gain of 17% – the best first-half performance since 1997!
This is also the best June for the S&P 500 since 1955, surging 6.9%
Despite the run, we’ve seen in stocks… it’s been messy.
For example, for the last month, stocks have been rallying on hopes that the Fed will accommodate and lower interest rates. In other words, rallying on bad news (fears of an economic slowdown).
Overall, it’s been a mixed bag for the economy and with trade uncertainty still looming… the odds of a July rate cut are now at 100%.
That said, other markets are reacting too:
- Bitcoin trading at $11,974.40
- Gold is above $1400 for the first time in six years
- Bonds remain strong (TLT is at 2016 levels)
- Crude Oil prices are up almost 29% in the first half.
What’s my strategy going to be heading into Q3 2019?
A little bit of everything… as I go into my bag of options trading tricks…
(Are you ready to receive my latest Bullseye Trade of the Week and crush the second-half of 2019? If so, click here to get started now.)
However, it’s time to prepare for the upcoming trading week.
In this Jump, I’ll analyze the OPEC meeting, economic calendar, earnings events, IPOs, trades I’m watching, and so much more.
We just closed the last trading day of the second quarter yesterday… and the S&P 500 Index ended the first half on a high note… in fact, it was the best first half in two decades.
Remember what happened two decades ago?
If not… there was the dotcom bubble… and not too much after that, we saw a massive crash… and that could be a reality soon in this market.
Right now, there’s a lot going on in the markets, and traders are overly optimistic… despite growth concerns.
The focus has been shifted to the G-20 summit…
… and President Trump agreed with China’s President Xi to hold off on new tariffs. Not only did Trump agree to that, but the POTUS also agreed to let Huawei buy U.S. products.
Now, that’s pretty much what the market was looking for.
Remember the last G-20 summit back in December 2018?
They agreed to forgo tariff hikes, but shortly after the POTUS increased tariffs to 25% on $250B worth of U.S. goods.
Could this be The Art of the Deal?
The POTUS could be getting China to back off on tariffs… and just catch them when the least expect it… but only time will tell.
We’re going to have to wait and see how the market reacts to this meeting on Monday… and it could be an exciting way to kick off the second half of 2019.
It’s going to be a pretty light week with the holiday and all… but now that the G-20 summit is out of the way… on the macro front, traders will be focused on economic indicators and the Fed.
The FOMC Will Be in Focus This Month
The Fed will be meeting again at the end of the month… and the market is already pricing in a rate cut.
However, until the Federal Open Market Committee sees clear signs of a slowing economy… and with the market near all-time highs… that doesn’t strengthen the argument for a rate cut.
You see, typically… when the Fed cuts rates, that means there’s something wrong with the economy and in order to stimulate economic growth… they lower rates.
We’re seeing the exact opposite right now… and there are a lot of disconnects in the market… and that could uncover a lot of trading opportunities.
Opportunities like these:
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For example, unemployment hit a 50-year low, coming in at 3.6%. Not only that, there are jobs being created, as shown by the last JOLTS reading.
Right now, economists are puzzled by this… and not just those at the Fed.
Not only that, inflation has remained stagnant, and until we see inflation rise… the Fed will probably leave rates unchanged… and the market may be jumping the gun here.
Clearly, the Fed has been trying to get inflation above the 2% target… but no cigar. Heck, some are even placing blame on companies like Amazon.com (AMZN) and other large e-commerce companies keeping prices low in order to increase competition.
The one interesting fact to note is that in the June 18-19 Fed meeting, the FOMC did not indicate that low inflation was transitory… and there was actually concerns about inflation consistently coming in below 2%…
… the forecast for growth has been cut to below 2%.
That said, inflation indicators will be key.
This week, traders will have a lot of economic indicators to focus on, more specifically, the monthly jobs number… and this will be one of the most important jobs report of the year.
This could give us an indication of whether the Fed will cut interest rates this summer.
Now, this won’t be the piece of data the Fed will be looking at ahead of its July 30-31 meeting.
That said, I’ll be watching ETFs like SPY, QQQ, TLT, GLD, GDX, as well as stocks.
Right now, I have a position in QQQ options, and if there’s just a small move in the underlying… I could see triple-digit returns.
Let’s take a look at what’s on tap for the economic calendar, remember… it’s going to be a shortened week due to the early close on Wednesday and July 4th (markets are closed on Thursday).
Monday, July 1
- 9:45 AM EST Markit US Manufacturing PMI
- 10:00 AM EST ISM Manufacturing
- 10:00 AM EST Construction Spending
Tuesday, July 2
- 6:35 AM EST Fed’s Williams speaks on Global Economic and Policy Outlook
- 7:45 AM EST ICSC Weekly Retail Sales
- 8:55 AM EST Johnson/Redbook Weekly Sales
- 4:30 PM EST API Weekly Inventory Data
Wednesday, July 3 (Market Closes Early)
- 7:00 AM EST MBA Mortgage Applications Data
- 7:30 AM EST Challenger Job Cuts YoY
- 8:15 AM EST ADP Employment Change
- 8:30 AM EST Trade Balance
- 8:30 AM EST Weekly Jobless Claims
- 8:30 AM EST Continuing Claims
- 9:45 AM EST Markit US Services PMI
- 9:45 AM EST Markit US Composite PMI
- 10:00 AM EST Durable Goods Orders
- 10:00 AM EST Factory Orders
- 10:00 AM EST ISM Non-Manufacturing Index
- 10:30 AM EST Weekly DOE Inventory Data
- 12:00 PM EST Weekly EIA Natural Gas Inventory Data
Thursday, July 4 (Markets Closed)
- No Major Economic Data
Friday, July 5
- 8:30 AM EST Change in Nonfarm Payrolls
- 8:30 AM EST Change in Private Payrolls
- 8:30 AM EST Change in Manufacturing Payrolls
- 8:30 AM EST Average Hourly Earnings
- 1:00 PM EST Baker Hughes Weekly Rig Count
We’ve got a pretty light earnings calendar this week, due to the holiday… but there are a few names to keep an eye on.
Monday, July 1
- No notable earnings.
Tuesday, July 2
Earnings Before Open
- Acuity Brands (AYI) implying 8.88% move (monthly contracts expiring July 19). Historical average move 12.37%.
- Greenbrier Companies (GBX) implying 12.60% move (monthly contracts expiring July 19). Historical average move 8.24%.
No Notable Earnings for the Rest of the Week
Energy Stocks and Exchange-Traded Funds (ETFs) Might be in Play This Week
Now, another event to focus on this week is OPEC’s two-day meeting on Monday and Tuesday. Traders are expecting OPEC to extend its 1.2M barrels per day in production cuts in a deal with Russia.
If the numbers come in line, oil probably won’t move too much… however, if there’s a surprise… look for energy stocks and ETFs, like USO, UNG, XLE.
Trading volume will probably be light this week with a lot of market participants taking the week off… but we’ll still be ready for anything, and I’ll let my clients know if I make any moves.
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