Market Refuses to Roll Over as S&P 500 Finds Support

The week started with nervousness about trade negotiations with China and some weak manufacturing and housing start data, but once again, the bears failed to press their advantage. There was slow but steady buying the rest of the day, with the Nasdaq 100 QQQ leading the recovery with a gain of 0.7%.

Talk about a possible Trump phone call with Chinese Premier Xi helped the bullish cause. Also, there was a surprisingly strong second-quarter GDP prediction from the Atlanta Fed of 4.6%. The narrative that tariffs will kill the economy is not developing as the bears have forecasted. Not only did the trade deficit fall sharply in the first quarter, but consumer income and spending were jumping as well. The run of positive economic news makes the jobs report that is due on Friday even more interesting.

One negative is the continued weakness in bonds. Interest rates are staying sticky to the upside, but it isn’t because tariffs are inflationary. The problem is that growth is too strong, and that is creating some upward pressure on prices.

Technically, the market has looked like it was on the verge of rolling over several times since the big gap up on the delay of Chinese tariffs, but each time the selling starts to pick up, there is some dip in buying interest that prevents any damage from being done.

At the close on Monday, the S&P 500 was back within just a few points of the highs it hit in May and appears to have very strong support at the 200-day simple moving average.

There continues to be a high level of headline risk if the trade and tariff deals don’t move forward, and also a failure of the Republicans to pass a budget and tax bill could be a problem as well. Lots of things could go wrong, but it just hasn't happened so far.

Have a good evening. I’ll see you tomorrow.

At the time of publication, DePorre had no positions in any securities mentioned.