Market Insights

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S&P 500 overview: Bullish triangle in play

• Consolidating, trying to break resistance at 2800
• Calendar has potentially bullish bias as earnings build
  • Factset: 47 of 109 S&P members have issued positive guidance so far. Best since 53 in all of Q2 2010.
• Risk: Breadth has been weak. No clear trade set-ups for index.

Economic focus: Manufacturing/industrial sector accelerating

• Tax cuts kicking in.
  • Bank of America (BAC): Tax cuts enabled $500 million IT investment
• Surprise growth in PC shipments in Q2.
• June manufacturing job growth (+32K) strongest since December 2011.
• July Empire index, June ISM manufacturing beat
• Earnings from FAST, AZZ may foreshadow broader strength
• RR traffic running at 3-4 year high.

Trade war: Escalating or scaling down?

• El-Erian, Mobius: U.S. winning trade war.
• Cramer: China non-response to $200 billion tariff threat on July 10 represents surrender to Trump.
• China quietly wooing foreign investors (TSLA, BASF) as leaders seek fiscal stimulus and avoid denouncing U.S. in state media. Beijing not devaluing.

Commodities & Rates:

• White House determined to prevent runaway oil prices.
  • 7/3: Saudis boost output
  • 7/16: Mnuchin softens Iran stance
• Metals showing little inflationary pressure.
• No clear catalyst for interest rates in near-term
• Goldilocks for now?
• Interesting to see refiners green with XLE down today.

Pullbacks to watch:

• Macy’s (M), Kohl’s (KSS) bouncing at 50-day MAs after strong earnings.
• Recent IPOs bouncing/stabilizing: Dropbox (DBX), Iqiyi (IQ), Huya (HUYA)
• Exact Sciences (EXAS) continuing higher after positive May 30 drug data.
• Refiners like HFC green today in sea of XLE red.

Options Activity:

• 7/16: Target (TGT) Call roll: July 70 calls -> Jan 72.50 calls
• 7/13: Twenty-First Century Fox (FOXA) Bullish 3-way: Aug 46p-48c-50c
• 7/12: DR Horton (DHI) Call buying: 27-July 42.50 calls (apparent earnings play)
• 7/12: PagSeguro Digital (PAGS) Calls rolled down: Nov 30 -> Nov 25 calls
• 7/10: SPDR S&P Retail ETF (XRT) Put ratio spread: 27-July 48 x 27-July 47 puts (1×2 ratio)
• 7/10: Norfolk Southern (NSC) call spread: 27-July 162.50 – 172.50