Craig Johnson’s

Market Commentary

Monday, July 14, 2014

Financial Markets Recap for Last Week:

·        Stocks pulled back last week as the market consolidated its recent gains. The biggest impact from the selling was felt by the small-cap sector. Growth oriented stocks, growth sectors and momentum names were also impacted. The Russell 2000 was down a tad under 4% for the week, while the S&P 500 decline was just below 1%.

·        Energy stocks, which have been one of the year’s strongest sectors, dropped during the week. The selling in these stocks occurred as the price of crude oil has dropped during 11 of the past 12 trading days, including a string of ten consecutive days lower during that span.

·        On Wednesday, the Federal Reserve released the minutes from their June 17-18 meeting. The policy statement remained the same, but the hidden surprise was the members of the Federal Reserve Open Market Committee plan on ending the quantitative easing bond buying program in October. Prior to this, much speculation was made about when they would end the bond buying program.

·        In addition to the program ending, the significance of the timing of that end is also important. Federal Reserve Chairwoman Janet Yellen has said that the Federal Reserve will start raising interest rates “something on the order of six months” after the quantitative easing program has ended.

·        Many market pundits view this separation of time by the Federal Reserve as important. It provides a clear distinction between when tapering ends and tightening begins.

·        The end to the tapering program fits well with the continued improvement in the economy. It seems many are finally looking beyond the employment data as the only economic item and focusing more on the general economy, which is steadily improving.

·        Gold broke through the resistance level at $1335.70 an ounce closing near $1339.

·        Last week’s gain extended gold’s string of consecutive weekly gains to six.

·        The yield on the ten year U.S. Treasury note fell last week after running into a wall trying to break through resistance at the thirty week moving average(2.701%). It closed last week at 2.52%. This was down from the prior week’s close at 2.648%.

Financial Markets Health and Outlook:

·        The stock market outlook remains moderately favorable as we pass the mid-point of the year. (Repeated from last week). Last week’s pullback and the market’s resiliency in the midst of heavy selling was quite positive for the market’s outlook.

·        The stock market has been in an overbought situation for quite some time. The market has successfully moved sideways rather than correcting with sharp sell-offs. Market sectors have rotated to leadership roles providing the market the resilience to press higher. (Repeated from last week). The market as measured by the larger dividend paying stocks found in the S&P 500 is still over bought. The market as measured by the small capitalization stocks found in the Russell 2000 is oversold.

·        The recent strength in gold has moved it closer towards a more significant resistance area that resides in the range of $1392 - $1395 an ounce.

·        The decline in crude oil prices continued last week dropping the price for a barrel of crude to under $101 from the recent high above $107. Support resides at the psychological level of $100 a barrel and further support is at the March and April lows around the $98.75 level.

·        Earnings season is upon us. This week the number of companies reporting will grow from the handful last week. In the coming weeks a flood of reports will be occurring.

·        The next Weekly Market Commentary will be on July 28.

Sources:,,, Dow Jones News, Financial Times,, Investor's Business Daily,,, Thomson Reuters/First Call, U.S. Dept of Treasury, and individual company web sites and press releases.

Leonetti & Associates, LLC views or opinions are as of a certain date and subject to change without notice.  The material contained herein is for informational purposes only and obtained from sources we consider reliable. We make no guarantee as to its accuracy or completeness.  References to specific securities and industries/sectors should not be considered recommendations to buy or sell any security or advisory service.  Past performance is not a guarantee of future results.