S&P futures are solidly positive and tariff headlines very quiet. After two days of decent gains the S&P futures are up +8.00 on Sunday night. The normally furious headline flow on tariffs has been very quiet this weekend. If we can make it into Monday without a tweet storm on tariffs, we could have a good week. President Trump will be in Europe all week and that will give reporters and analysts something else to talk about.

The Q2 earnings start with the big banks on Friday and then kick into gear the following week with a flurry of big cap reports. This should energize investors with Q2 earnings expected to grow by 22% according to Bank of America. I am hoping for a very good earnings cycle because August and September could be rocky for the markets. The summer doldrums could be especially bad this midterm election year because the tariff issued need to be resolved well before the elections. That means a lot of headlines in late July and August.

Everyone seems comfortable with the economy and with the exception of the stronger dollar, inability to hire needed workers and the impact from the tariffs, earnings should be good.

The economic calendar for next week is relatively bland with the PPI/CPI price indexes the only material events. The NFIB Small Business survey will be closely watched but it rarely moves the market. The economics are giving us a smooth runway into the Q2 earnings cycle.

The S&P had a good week and gained 41 points to close 9 points over resistance at 2,750. The 100-day average held as support and despite some increased volatility, the index closed at the high for the week. The gains were purely based on the tech components because any large cap industrial like Caterpillar was hugging their recent lows. There is still a lot of angst over how the tariffs will affect their businesses.

The S&P is poised to retest and possibly break through the March high resistance at 2,792. The approaching Q2 earnings cycle should provide the momentum. The obvious roadblock would be an escalation of tensions over the Chinese tariffs. With President Trump scheduled to go to Europe this week, there is a possibility China will be on the back burner. Of course, he is fighting with the EU as well but there is also the potential for some positive tariff news out of the EU. Germany and others are considering dropping the tariffs on their cars and that would keep the president from enacting his threatened tariffs on Mercedes, BMWs and others.

The Dow components were mostly positive but only six had gains of $1 or more. The Dow closed 66 points off its highs and I attribute that to weekend event risk. Traders were afraid to hold their post holiday gains over the weekend where a new tweet storm was likely to appear.

The Dow finally closed back over the 200-day average but is facing strong resistance at 24,500 and 24,700 as well as the 100-day and 50-day both around 24,620.

The Nasdaq posted the strongest gain at +1.34% thanks to Biogen and Apple, which were the two biggest Nasdaq point contributors at 11 points each followed by Facebook at 10 points and Microsoft at 9 points. By comparison, GOOG only contributed 5 points and GOOGL 3.6 points.

The Nasdaq blew through resistance at 7,600 and could easily set a new record high next week if the market cooperates and ignores the tariff issues.

The small cap Russell 2000 posted another nice gain and pulled to within 13 points of a new high. The small caps are doing great but the tech stocks are neck and neck. The strong rally in the biotech sector helped both indexes to strong gains.

I was anticipating the post holiday rebound and I am expecting the markets to be positive next week. The wild card will be the tariff issue. If the president launches another attack with more tariffs, the market will probably not take it well. If the status quo remains intact, the market will probably shake it off and begin focusing on earnings.

Enter passively and exit aggressively!

Jim Brown

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