Markets on Edge into Q2 Earnings

I’ve never believed the “Dog days of Summer” start until mid August.  July is like January without the snow.  

First Half performance numbers are in the books and a BIG earnings season is on deck.  The S&P 500 was a Doughnut for 1H 2015.  Even Treasuries did better.  Active managers have their best shot in many years to prove they can beat the Indexers and rebuild their AUM.

Map of the S&P 500

spy map july 10

They’re not going to do it by sitting on their hands.

Thursday recap:  Major  Stock Market averages all made their highs in the first 15 minutes of trading yesterday as a strong rebound in Chinese markets was the catalyst for a relief rally around the globe.  By midday, averages had given up half their gains and markets continued to drift lower into the afternoon.

A 2:30  PM rally failed to gain momentum in the last hour, as most averages closed with just marginal gains, at or near their lows of the day.

The S&P 500 at 2051, DJIA  at 17,548, and NASDAQ at 4922  all settled with gains of +0.2% to +0.25%.

The Russell 2000 +0.4% at 1234, fared a bit better.   It is a warning sign that the S&P 500 and the DJIA closed below their 200 day MAs of 2055 and 17,695 for the second consecutive day, particularly after trading above that benchmark for a good portion of the day.

We have to watch very closely as earnings season gets into full gear next week to see if the 200 day MA proves to be resistance on any further rallies.

NASDAQ at 4922 remains 2.3% above its 200 day MA of 4812, but there is plenty to be concerned about here.

The SOX, -1.3% at 646.64 semiconductor index continues to break down and is now 5% below its 200 day MA.   MU continues to lead the decline in this space, down another 1%+ Thursday.  It’s very hard to see a turn here until at least later next week as INTC reports after the close on Wednesday.

Maybe by then the sentiment will be so negative for the chips that even a modest report by INTC will provide some relief.

AAPL -2% at $120.07 was the “Buzz” early afternoon, briefly trading below $120 and threatening its 200 day MA of $118.75.  $AAPL did close 10.8% below its all time intraday high of $134.46.  I usually stay away from intraday highs and lows, but AAPLs intraday high on April 28 was the day following their fiscal Q2 earnings report.

AAPL | Apple Inc.

aapl july 10

This also turned out to be an outside reversal day for AAPL stock as it failed to make new highs during either the May or June market peaks.

Watch the AAPL volumes closely the next few days as well as the 200 day MA of $118.75!!  Volume Thursday was 77 Million shares, 70% higher than its average daily volume of 45 million.

We’re 6 trading days into Q3. Five days from the middle of July and the “Summer Doldrums” are nowhere in sight.  Volumes have been brisk and Q2 earnings season gets into full gear next week.

Active managers should be very busy the next 4 to 6 weeks.  The S&P 500 was basically unch for the first half of 2015.  Active managers have their best opportunity in years to sell their goods as an alternative to index funds.

Don’t expect them to just sit back and “watch”!!

tanderson@mndpartners.com tjanderson56@gmail.com

Twitter: @TJAnderson1

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