Market Update (July 1): Commodities Look Textbook

This morning, the stock market rose on trade war optimism.

However, the rally in our key economic Modern Family members, comparatively died out.

The Russell 2000 ETF, Transportation Sector, and Retail Sector just could not keep the upbeat tone going.

I do not find this surprising. Early on, the dollar and yields rose.

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Gold (NYSEARCA: GLD) and silver (NYSEARCA: SLV) fell.

And the grains also took a tumble (NYSEARCA: DBA).

This suggests that not only are some poor economic stats such as U.S. Manufacturing to blame, but also that initial damage from trade tensions has surfaced.

The Russell’s look at manufacturing or supply side. Same with brick and mortar retail.

Transportation looks at how goods are moving, or the demand side.

The other part of the equation concerns commodities.

It appears that futures traders want something more from the Fed. Commodities want lower yields.

But, although the key sectors softened from their initial highs, commodities traders did not run back into gold, silver or grains. (or Cryptocurrency for that matter.)

Will they?

An update on the silver to gold ratio.

Notice that the silver has begun to turn up (bottom chart) compared to gold. 

It still has to clear the red line or 20 day moving average. 

Should silver begin to perform better than gold, it will be because equities turn sour, yields fall, and the anticipation is the banks will save the day. 

The next chart is of DBA or the Agricultural Fund.

Textbook perfect, DBA ran right up to the 50-week moving average and sold off.

That makes the situation for investors relatively transparent.

Should IWM, IYT, XRT get going again, then stay away from gold, silver and most likely grains. The underlying sentiment will lean towards the FED remaining more hawkish.

Should IWM, IYT, XRT fall further, watch the technicals on the two charts. And of course, watch for FED dovish chatter.

Silver will be a long-anticipated buy on a close over the red line. 

DBA will be a long-anticipated buy on a weekly close over 16.95. 

Every Tuesday and Thursday, I will be on KKOB radio at around 6:15 PM mountain time (8:15 PM EST) to discuss markets and market news.

S&P 500 (SPY)– 296.92 printed a new all-time high although it closed at below the June 20 high. Support at 293

Russell 2000 (IWM)– 154.75 is the major support with 161 resistance overhead.

Dow (DIA) – 269.28 all-time high with 265 support.

Nasdaq (QQQ) – 191.32 all-time high. 187 support.

KRE (Regional Banks) – 53.25 needs to hold up. 55.10 the major resistance to clear.

SMH (Semiconductors) – 115.70-116 resistance. Support at 111.60

IYT (Transportation) – 190 first level to clear again. 191.85 resistance to clear. 188.64 support to hold.

IBB (Biotechnology) – 109.45 the pivotal number to watch.

XRT (Retail) – 42.00 support. 42.45 pivotal area-has to get back above 43.15 

Twitter:  @marketminute

The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.