Equities Looking for a Breakout

By James Dondero | June 19, 2015

  • Commodities remain weak, with several sub-sectors verging on breaking support this week. Feeder Cattle have been the exception, which have advanced nearly 20% since their Jan’15 low. Based on the Commitment of Traders report the ‘Commercials’ have positioned themselves more short than at any time over the past 2 years and appear to be expecting a price decline.
  • Also moving lower last week were interest rates. Important on the charts was the yield on the 5-year US Treasury failed to break through the 1.80% area, which further suggests that yields are most likely forming an intermediate-term trading range. Longer-term, we continue to believe yields would likely trend lower in a deflationary environment.
  • US Stocks were showing renewed signs of strength last week until Greece and triple witching expiration weighed on the market on Friday. We remain optimistic on stocks, which are near moving out of their recent ranges to the upside. One reason being the continued leadership being shown by both the health care and consumer discretionary sectors.
  • Looking beyond Greece, the big news overseas was the vicious decline in Chinese stocks. So far, the weakness continues to resemble a pullback within an established uptrend. The German market has also been drifting lower, and the DAX is another we consider to now be offering a buyable dip.

 

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