Three Keys to a Bottom (Updated)

What’s in Today’s Report:

  • Three Keys to a Bottom Updated (Some Progress But Not There Yet)
  • Economic Takeaways – Goldilocks Trends Emerging
  • Weekly Economic Cheat Sheet

There is a tentative risk-on tone to trading this morning as U.S. equity futures track global shares higher thanks to new stimulus measures in China and easing natural gas prices in Europe.

The PBOC announced new measures to help stabilize the yuan and bolster the economy in the face of renewed Covid lockdowns and recent signs of slowing growth which was welcomed by markets overnight.

In Europe, German Manufacturers Orders fell -1.1% vs. (E) -0.4% but that is helping dial back some of the recently more hawkish policy expectations ahead of this week’s ECB meeting.

Looking into today’s session, there is one economic report to watch: ISM Services Index (E: 55.4), and no Fed officials are scheduled to speak.

That should leave the focus on currency and bond markets in the U.S. if both the dollar and short-duration yields can stabilize, and not move materially higher, then stocks should be able to make an attempt to stabilize after Friday’s late session reversal lower.

Additionally, if we see natural gas prices in Europe continue to pull back from Friday and yesterday’s rise, that should help the risk-on mood in markets persist as the Nord Stream 1 halt was the main catalyst for stocks rolling over on Friday.

Technical Update: Potential Bottom Forming?

What’s in Today’s Report:

  • Technical Update: Still Trending Lower But Potential Prospects of a Bottom Forming
  • Charts: S&P 500 Downside Target Reached, VIX in Compressing Range

Stock futures are modestly higher with global shares amid positive news out of China regarding covid policies.

China announced shortened quarantine times for incoming visitors in the latest move to ease covid-restrictions and potentially move away from their zero-Covid policy stance.

Economically, the German GfK Consumer Climate Index for July was no worse than feared at -27.4 vs. (E) -27.9 which is easing concerns about a swift drop-off in global economic growth.

Today, there are several economic reports to watch for: International Trade in Goods (E: -$102.0B), Case-Shiller Home Price Index (E: 1.8%), and most importantly Consumer Confidence (E: 101.0). Investors will want to see a continued slowdown in the data, but not to the degree that would raise concerns about a “hard landing.”

Two Fed officials are also scheduled to speak today: Barkin (8:00 a.m. ET) and Daly (12:30 p.m. ET) and there is a 7-Yr Treasury Note auction at 1:00 p.m. ET that could move yields and influence stock trading.


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Tom Essaye Quoted in Barron’s on June 6, 2022

The Dow Ends Higher — and What Else Is Happening in the Stock Market Today

We need to see more proof those Keys to the Bottom are becoming more likely for stocks to move materially higher from here…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Bounce or Bottom? A Key Level to Watch

What’s in Today’s Report:

  • Bounce or Bottom?  A Key Level to Watch

Futures are slightly higher following a night of mixed earnings and continued reopening in China.

Shanghai continued to reopen and Beijing is still avoiding the most draconian lockdowns and that’s helping broader market sentiment.

Economic data was sparse as the only notable report was Euro Zone M3 (6.2% vs. (E) 6.3%) but that’s not moving markets.

Today the key report is the Core PCE Price Index (E: 0.3%, 4.9%) and if it underwhelms vs. expectations and furthers the idea that inflation has peaked, look for a continuation of this week’s rally.  We also get Consumer Sentiment (E: 59.1) and the key there will be the five-year inflation expectations.  If they drop below 3.0%, that’ll be an additional positive for stocks today.