Reality has a funny way of showing up and setting things straight. The news on Friday was Spain’s largest region needed a bailout and it sent the global markets lower. The concerns, worries and fear of that situation grew over the weekend. As we start a new week of trading this fear is setting a new course for investors. In the weekend update I discussed this very issue of shortened swings driven by news and emotions. This remains a tough trading environment based on erratic decision making. You have to take it one day at a time and protect against the short term emotional swings.
What are we facing this week in the markets? The biggest hurdle is Spain and that is like trying to pick up Jello with a fork. Too many issues and no real answers, only hope. That will lead to more speculation about the fall out from a default on debt. Any way you shape the issues they will have an impact on the global markets.
Earnings are still coming with Apple and Facebook offering their results for the quarter. They will be watched closely as Apple analyst are expecting a slowdown in iPhone sales ahead of the new phone release planned later this year. Either way investors are looking at the consumer spending side of the equation. Is the consumer pulling back again and spending less? If so, what are the ramifications to the economic picture looking forward? This is not new speculation, but one that is being refreshed by earnings reports. The revenue numbers have been on the light side for some of the key consumer related stocks such as Chipotle on Friday.
The housing market gets more data this week on the strength of the uptrend in play. The uptrend in the builders has been positive, but we may be heading into a lull for the balance of the summer months. That said, it remains a sector to watch moving forward. The homebuilders may have peaked short term, but the supporting cast of stocks are moving. Louisiana-Pacific (LPX) and Cemex (CX) are two that showed up in my scans of the sector this weekend. Looking for the breakout n CX to follow through from Friday.
Transports have continued to trade sideways, but here again digging into the sector has shown some leadership worthy of tracking. Rail stocks are pushing against the highs and remain in a solid uptrend. CSX is setup to break above resistance at $23. The automobile sector has been a key component in the strength of the railroad stocks. Ford and GM are set to ship more cars as sales have improved. This remains a sector worthy of scanning for the leaders.
Oil Services broke higher last week on the strength of crude oil. The million dollar question is will the speculation and geopolitical issues be enough to keep the prices moving higher? The hiccup from Spain this week may derail the progress short term, but that doesn’t resolve any of the issues facing the price of crude. Demand has not been a driving factor in the move off the recent lows. Watch to see how reality and speculation collide this week. The price of crude is trading down 3% this morning on the Spain issues.
This remains a news driven market cycle. That makes it a difficult market to trade or invest. You can find yourself trading on speculation and events. Those are not sound foundations for trading. You may be right on your picks, but don’t confuse luck with discipline trading strategies. Take what the market gives, but be prudent in how you address this market day by day. Remember, CASH is a sector.