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world stock market, us stock market
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7/06/10 Investment House Alerts
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MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: CREE; FFIV
Trailing stops: ROST
Stop alerts: ASH; CMI; EDU; FNSR; WHR; WRLD
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The Market Video is DIVIDED into component parts: Market Overview, Technical Summary, Economy, and the Next Session. This allows you to choose the segments you are interested in without having to find the segment in a longer video. Click on the link to the portion you wish to view.
MARKET OVERVIEW
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http://investmenthouse1.com/ihmedia/MarketOverview.wmv
TO VIEW THE TECHNICAL SUMMARY VIDEO CLICK THE FOLLOWING LINK:
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TO VIEW THE NEXT SESSION VIDEO CLICK THE FOLLOWING LINK:
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SUMMARY:
- Third week in a row starts with a nice gain . . . then gives it away by the close.
- Buyers fail at SP500's prior lows as sellers try to enforce head and shoulders break.
- ISM Services decent but drops below expectations.
- Small caps reverse sharpest. They have room to give ground but they are starting to show cracks.
- Market is oversold but again indices are at a resistance point, this time with the head and shoulders on top.
Another start to a new week, another rally given back.
For the third week in a row, the market started the week to the upside. It posted some hefty gains only to see them fade by the close. This has been the pattern in this selloff, but you would expect that in a selloff. There are early gains as hope rises, but the market is unable to see them through to the close. I will go into greater detail in the technical section, but the most interesting feature was the SP500 rallying up to touch the prior 2010 lows. That is the move I was watching for, but it reversed to give it up. It managed to close with a 0.5% gain better than a lot of the stocks but it was not impressive by any stretch.
Looking at the intraday chart, things started off well with a gap to the upside and then a rally. That rally continuing a half hour into the session even though the ISM services for June came in at 53.8. That was less than the 55.0 expected and the 55.4 in May. That was good enough to keep the market moving, but it was not good enough to keep the moves in place for the rest of the day. By the end of the first hour, the market had emptied its ammunition, and for the rest of the day it slid back; it even touched negative in the early afternoon. There was a bounce, and then it started the last hour negative before a late run was able to salvage modest gains on the large cap indices (namely the SP500 with its 0.5% gain that led the market to the upside).
What was the reason for the upside? There was not a lot of news, and it was the oversold condition we have seen all along. After all, it has been a sharp two weeks to the downside, and the market was ready to test the break below the 2010 lows. Australia was given some of the credit, because it reaffirmed its confidence that its prior rate cuttings would remain in place. It did not raise the rates any further it was not that confident in the economy but it noted a lot of the world economies were doing better, and that the Chinese economy would moderate. That seems like it would not be great news, but the fear is for bubbles in China. They are there (as we know from the real estate market), but they do not want them to pop. Any moderation in the economy is better than a surge and better than a collapse. They were trying to strike that confidence-building tone, and it seemed to work for part of the day. Here in the US, the office space situation is bad. It is bad in China as well. In Beijing, half of the office space was not leased six months ago, and it is a bit worse than that now. Q2 in the US saw office space leasing down 1.8M square feet. That was less than the prior two quarters, so I suppose that is something to cheer about.
On the day, it was not stellar. The large cap indices NASDAQ, the Dow, SP500, and NASDAQ 100 managed to close upside. The Dow and SP500 were trading blows for leader of the day, rising roughly 0.5%. Nothing particularly stellar when you consider the technical move. The move that was most disappointing was the SP600 dropping almost 1.5%. The small caps are economic harbingers. They did start higher but, unlike the rest of the indices, they reversed and sold off to a new low in their rally. There is still room for them to fall and keep above the 2010 lows, but it is not a good indication that small caps are leading to the downside over the near term.
OTHER MARKETS.
The stock market did not change its stripes on Tuesday. In other words, it remained in a weak pattern and was unable to hold gains. That was the same for the other markets as well.
Dollar. The DXY0 continued its fall. It had a rather dramatic drop last Thursday, and was unable to recover it on Friday. Tuesday it was down again (1.2622 Euros versus 1.2548 Friday). Over a week ago, recall that the dollar was at 1.21 Euros, so that is a huge reversal. This is due to concern over the US economy. The dollar was had a lot of extra money put into it from Europe on worries that it would go down. Now that there are fears of a double dip in the US with weakening data, the dollar is no longer such a great store of wealth. It does not help that the administration is talking about more dollar printing; in other words, more stimulus of the kind we have seen before that produced a lackluster recovery at best. The dollar is heading lower for the near term.
http://investmenthouse.com/ihmedia/dxy0.jpeg
Bonds. The bond market action did not change either. It continued higher after a brief hiatus to end last week (US 10 year yield 2.94% versus 2.98% Friday). Lower yield means higher bonds and better pricing. Bonds continue to rally, and money comes to the US even though we have some economic issues. The US is not as bad as some of the places overseas. This is also the natural reaction when an economy is going down. Bonds are where people want to put their money to survive when stocks sell off due to a weaker economy. The bonds market is therefore rallying even though the US economy is in trouble. Bonds rallied because money moved out of Europe into US Treasuries for a safe haven. If the US stock market is not going to look good, US investors look to the bond market again. There does not seem to be an end in sight for bonds moving higher, and that is not necessarily a great thing for the US economy by its predictive measures, it is not good for the US stock market either.
http://investmenthouse.com/ihmedia/tlt.jpeg
Gold. Gold had another rough session ($1,193.40, -14.30). Gold did not have the recovery from the one-day sharp selloff on Thursday, and it is continuing to the downside right now. Deflation is trumping now that the US market is in trouble. There is concern that there will not be the near term inflation because of all the issues. That does not mean there will not be longer-term fears. We have printed a lot of money and there is talk of printing more. As soon as it looks like there is a bottom, gold will move back up just as it did in late 2009 and early 2010. Printing a lot of money is an inflation time bomb, and we are not going to get off so easily with a double dip to bail us out of inflation. Usually there is the double dip and then inflation comes in on the backside. Slowing economies do not help inflation; they only tend to exacerbate it. We have a lot of demand-driven stimulus, and that drives demand up when there is no investment by companies or businesses. Demand then outstrips supply, and that is the classic inflation scenario. That is particularly true when there are extra trillions of dollars floating around that are unwanted and unneeded.
http://investmenthouse.com/ihmedia/xgld.jpeg
Oil. Oil did not fare any better. It was trying to move up, and it showed the same action as the indices. It surged early, could not hold the move, and it finished flat ($72.20, +0.06). Not a big move. The problem is it broke this trendline and has been unable to make any traction to the upside. With the US economy in question, there is not much reason for oil to move higher if we will not need that extra oil. Oil has not made it to the top of its range. It did make it to a resistance level, and that punched it back down. For now, it looks to be range trading.
http://investmenthouse.com/ihmedia/xoil.jpeg
TECHNICAL PICTURE
INTERNALS
Volume. Volume was up. NASDAQ rose 35% to 2.1B shares, and NYSE rose 20% up to 1.3B shares. That put both of the indices near average on the day. Not huge volume, but more in line with the volume immediately preceding the holiday. That keeps it at a level where it does in fact tell us something. The sellers moved in after the buyers tried to bounce the market higher and were unsuccessful. Even though the indices closed higher, it was an unsuccessful day because they were pushed back down after a test of the SP 2010 lows.
Breadth. Breadth was not bad on the NYSE with advancers leading 1.1:1. That is what the indices showed outside of the SP600 which was down 1.5%. There are a lot of small caps on the SP600 that can still be in the NASDAQ. On NASDAQ there was an almost -2:1 decliners over advancers on breadth, and that corresponds to the sharp 1.5% decline on the SP600. A lot of small energy stocks, mining stocks, tech stocks, and growth areas were selling. That is why there was lopsided breadth on the NASDAQ which did not match the gains that the NASDAQ and NASDAQ 100 were showing on the session.
CHARTS
SP500. SP500 had a disappointing day even though it closed +0.5%. It rallied up to the 2010 lows the move I was looking for and it ran away from them. You can say it is in the range of the last week, trying to hold to make the move higher. After all, it has been down for two weeks and is primed for a bounce upside. The problem was that it made the bounce to the upside, but it could not hold it on Tuesday. That is not necessarily a great thing for the index overall and for its ability to make the move higher. Another thing to watch is that it is in this six-month head and shoulders. It broke below the neckline last week, and the bounce back up would be normal to test. Typically you would say it is ripe for a bounce, and indeed it is. You also have the bears saying it broke its neckline. It is down below that, and they would expect a test. They would jump all over it and send it back down into the 900's in order to consummate the head and shoulders pattern. We will see how that plays out over the next few days. We will have to be ready for the upside plays if it breaks back into the range, or prepared for some downside plays if it continues down from here. Normally I would look for a better downside entry point than just after a two-week decline, but with the head and shoulders over the six-month period, that is a significant top. A rebound to test that breakdown would show the picture of a continuing downtrend in the pattern that the bears are looking for.
NASDAQ. NASDAQ showed similar action as it gapped higher and rallied up to its February low that it broke last week. Then it rolled over and closed basically flat. A modest gain, but nothing that mattered much. Volume was up near average, so there was some selling coming in to push it back down. Similar to the SP500, it can still rally from here, but it also has the six-month head and shoulders pattern similar to SP500, and it has broken below the neckline. If it cannot recover, the bears will think it should not recover and they should send it down along with the SP500. I will be watching this to see if it will make the move up or down. There are still excellent stocks in the index that look ready to move higher. The question is whether they will be able to win out over all the negative action in the market. Again, you have two weeks to the downside; it is primed to bounce higher, but there is the six-month topping pattern ahead of it which the bears will try to make some hay out of.
SP600. SP600 was very disappointing because it surged higher, and it also tested some of its prior lows (although still above its February low). Then it reversed and closed negative indeed, a new closing and intraday low on this selloff. The SP600 does not look healthy at all, and it is the economic harbinger. It still has room to the downside. It could get down near 309 and still be holding its prior lows for the year. That technically puts it in a better position than the large cap indices because they have already broken their 2010 lows. You could still say the small caps are stronger, and they were starting from a better position. The problem is they are playing catch up now and they may try to get there. If they do, then all bets are off as far as economic recovery because the small caps are starting to accelerate to the downside. If they overtake or catch up with the large caps, that is not a good indication for the economy.
SOX. SOX continues to be one of the more interesting of the indices, although they are all getting fairly interesting right now. It is below its recent closing low, but it is holding in this range it has held three and now maybe four times over the past two months. This is a long-term support range, and it is trying to hold and make the move. It is interesting that it could not make a break higher and stick even though there was good news from some companies reporting solid sales. It continues to hang in this level. If it can make the break higher, that would be a positive, but it would need help. It would need NASDAQ and maybe the SP600 to come with it (and SP500 certainly would not hurt). We will have to see how it plays out. There is a problem with the market holding onto gains. Whenever that happens and there is good news as well, even after a two-week selloff, there are red flags. You wonder whether there are any buyers out there willing to step in and send the indices higher even though they are primed to do so.
Looking back at the SP500, you can see the head and shoulders. It broke below the neckline level and tested it on Tuesday on the high and fell back. It has not tipped its hand necessarily, but I have to say that near term the action is downside. With a six-month head and shoulders top in place, you have to watch it. We will be looking to play some SPY and DIA to the downside and a few others if it continues lower. Even though it has two weeks of selling under its belt, if it fails at the neckline once again, I would look for it to turn back down. If it does make that move, you would play it to the downside because you are playing the probabilities to that point. There are still a lot of plays that look good to the upside. I have those on the reports, and they still look good even after today. Those mean there could be an upside break even with the head and shoulders because we had this sharp selloff. We have good patterns in position to make a move to the upside.
LEADERSHIP
Financial. GS did not perform too terribly on the day, and it has been moving laterally for the last few sessions. It was upgraded, but it was not able to put together that big of a move. It held just under a 1% gain, but it was well off its high and continues to struggle. Ever since the initial selloff on the lawsuit from the Feds, it has tried to level out and put in a floor. I am not ready to jump in and buy it just yet. If it was able to hold the gain today, it may have made a difference; it did not, and that made the difference in wanting to look at it right now. JPM has sold off over the past week, but it is also trying to move laterally and had a decent day as well. 1.4% on the upside not huge, but it is trying to set up and make a break. I would not be buying new positions after this pullback. If it does break back through the lows and can make that stick, you have a false breakdown and could get that play to the upside and maybe add to some positions on it.
Energy. Energy was having a better day. HAL gapped higher although it gapped to the 50 day EMA where it has failed twice over the past three weeks. We are looking to play this downside if there is a gap down that might be interesting and give us play we are looking at. It is picking up some momentum of late. After all the bad news with BP, they are finally ready for some good news; indeed, even BP itself shows another gap higher. It gapped to the upside last week off a lateral move. It moved laterally to end last week, and Tuesday it was up again. BP may move higher and is getting help from sovereign funds that want to own it. It is relatively cheap at this point, and they need to get in while the getting is good. BP is responding a bit to the upside, and indeed all of energy is up a bit.
Semiconductors. NVLS did not make the run higher on Tuesday, but even though it could not make all of the moves stick, it is still in a nice pullback over support and could very easily roll back up in the range. It just needs the other indices to move up as well. It is more than ready to do so. SWKS gapped higher and rolled over on the day, but it still held the 50 day EMA. It has a great test of a breakout of a solid base. It is definitely a good-looking pattern in the market. It is in position to move if is indices are ready to break to the upside. Of course, a lot of this depends on whether they break upside or not.
Industrials. CAT is still in a good triangle pattern. It is trying to make another higher low at the 200 day EMA again. It did not hold the move on Tuesday, but not many stocks did. It still looks quite solid. It is still in position to make the move higher, and it depends on whether or not it makes that move.
Technology. FFIV has a very nice ascending triangle, and it made a higher low at the 50 day EMA. It broke higher on Tuesday, but it could not make it all stick. It still looks solid. I am still excited about it if it can continue to the upside.
Retail. There are many aspects of retail, and I am looking at one of the value players. NDN tried to make the break higher on Tuesday. It could not hold the move and finished flat. It broke its trend to the downside, it moved laterally, and it is trying to break to the upside. If it can start back up from here and make that move stick, that looks good. Deep discount tends to work in economic downturns. Looks like we are headed back that way, and thus stocks such as NDN move higher as well as DLTR. DLTR was down on the session, but that was after gapping higher. It reversed, but it is still solid in its uptrend. NFLX still looks quite nice at its 50 day EMA. It could not make the move stick on Friday or Tuesday, but it is still solid in this pullback with an ABCD pattern. We will see if it can break to the upside and give us a move higher. PCLN had its selloff. It is trying around this range, and it was up on Tuesday. It made some of the move stick, and if it can continue it looks good.
There are leaders out there in position to move. They are not in patterns to break out to new highs and move. They are in patterns that look like they have sold back to support and are in an excellent place to run higher in their range yet again. That depends on whether the indices will do it or not. They could either move back up in their ranges, or they will they fail with SP500 and NASDAQ turning down and selling off from their head and shoulders patterns (and, of course, having the SP600 catch up with them to the downside). That would not be a positive for the economy, obviously, but it may be a reality that we have to play.
THE MARKET
MARKET SENTIMENT
VIX: 29.65; -0.47
VXN: 31.65; -0.54
VXO: 29.14; -0.56
Put/Call Ratio (CBOE): 1.13; +0.23
Bulls versus Bears:
This is a reading of the number of bullish investment advisors versus bearish advisors. The reason you look at this is that it gives you an idea of how bullish investors are. If they are too bullish then everyone is in the market and it is heading for a top: if everyone wants to be in the market then all the money is in and there is no more new cash to drive it higher. On the other side of the spectrum if there are a lot of bears then there is a lot of cash on the sideline, and as the market rallies it drags that cash in as the bears give in. That cash provides the market the fuel to move higher. If bears are low it is the same as a lot of bulls: everyone is in and the market doesn't have the cash to drive it higher.
Bulls: 41.1% for the second straight week as bulls became pensive. They rise as the market peaked on this last selloff and held steady as the selloff raged. Talk about an inverse relationship. Fell from 43.8%, 47.2%, and 56.0% before that. This move started at a low of 35.6% in February, the lowest it has been since July 2009. 35% is the threshold level suggesting bullishness. After peaking at 53 on this move the bulls lost some nerve, falling to a new low post- July 2009. Once again bulls peaked out near the 50% level. Bulls have bumped at 50ish since late August 2009, falling to 45ish and then rebounding. Hit a high of 47.7% mid-June on the run from the March lows. Again, to be seriously bearish it needs to get up to the 60% to 65% level.
Bears: 33.3%. Unlike bulls, bears rose as some investors became more bearish during the market selling. Makes sense and now it is approaching the 35% level that is considered market bullish. Solid rise from the mid to upper 20's. Fell to 18.7% on the low. Hit a high of 27.8% level on the prior leg in February. Over 35% is considered bullish for the market; definitely at the lower end of the scale. Peaked near 28% in November, falling short of the 35.6% hit in July 2009. For reference, cracking above the 35% threshold considered bullish. Hit a high on this run at 47.2%. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.
NASDAQ
Stats: +2.09 points (+0.1%) to close at 2093.88
Volume: 2.17B (+35.16%)
Up Volume: 1.016B (+521.864M)
Down Volume: 1.075B (-12.132M)
A/D and Hi/Lo: Decliners led 1.96 to 1
Previous Session: Decliners led 1.74 to 1
New Highs: 14 (+6)
New Lows: 180 (+44)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +5.48 points (+0.54%) to close at 1028.06
NYSE Volume: 1.317B (+19.42%)
Up Volume: 685.158M (+382.493M)
Down Volume: 547.125M (-235.358M)
A/D and Hi/Lo: Advancers led 1.08 to 1
Previous Session: Decliners led 1.41 to 1
New Highs: 103 (+19)
New Lows: 119 (+4)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: +57.14 points (+0.59%) to close at 9743.62
Volume DJ30: 217M shares Tuesday versus 199M shares Friday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
There no economic data because oil inventories were moved to Thursday due to the short week. There will not be much excitement coming out of the pipe economically other than some possible surprises from other countries.
I do not want to beat a dead horse, but we are at a very important point. We have a head and shoulders spanning a six-month top that is the tail end of this long run off the March 2009 low. We have had a strong move up for a year, and now we have had a topping pattern over the last six months. It looks like it is breaking lower. If it breaks to the downside, we will move into more SPY, DIA, and those types of downside plays. Even though it has already put in a two-week move to the downside, if it rolls over from here, then that is for the consummation of these head and shoulders patterns on the SP500 and the NASDAQ.
The bears are thinking since it is broken they should push it down into the 900's. If that is the case we will play those, and it would be a decent probability play because there is a good stop/loss point at the prior lows. No issues there. Potential downside is great, and the potential loss is not bad. You are in good position to make a play to the downside if the indices break that way. If they are not going to pay attention to the long head and shoulders pattern (and sometimes they do not) and move back to the upside, then that is great. We have a lot of patterns that look good. They are still in the same position they were before with not many breakdowns. Not many breakouts either, but they are still in good position to make the move higher, and we can play them to the upside.
Again, we are in the position of watching what the market will do. Note that the SP500 rolled over the last time it was in a position where it tested some other important resistance levels as it did at the June peak. It is a different situation here because it was down over two weeks before it made the test. You would think it is not in the same position because it rallied two weeks before the other test and rolled over. Now it is down at the bottom and, although it tested a day, that does not mean it will fall again. We have to take into account the six-month topping pattern and give it its due. If SP500 fails here, we will play it to the downside. If it breaks higher, we can play some of the upside plays and let our current positions run back to the upside.
I cannot tell you with 100% certainty whether it will go up or down. You never can do that anyway, and this is one of the situations where the bears and the bulls are still fighting it out. The bears have had the upper hand right now, and have had it for at least a couple of weeks more likely ever since the late-April peak. Now with the failure here and the break below the neckline in the SP500 and NASDAQ, this becomes a very important point. If it fails here, we have to play it to the downside. That is just the hand that we are dealt, and we will play it whether upside or downside. Have a great evening.
Support and Resistance
NASDAQ: Closed at 2093.88
Resistance:
2100 is the February 2010 low
2155 is the March 2008 intraday low
The 10 day EMA at 2156
2167 from the July 2008 intraday low
2168 is the September 2009, intraday peak
2169 is the March 2008 closing low (double bottom)
2177 is a low from March 2008
2185 to 2195 represent support points for years: December 2004 peak, July to October 2005 consolidation, January, March and July 2008 lows, and October 2009 peak.
2205 is the November 2009 peak 2210 (from September 2008) to 2212 (the July 2009 closing low)
2245 from July 2008 through 2260 from late 2005.
The 200 day SMA at 2253
The 50 day EMA at 2260
2275 - 2278 from the February 2008 and April 2008 lows
2273 to 2282 marks bottom of January 2010 lateral peak
2292 is a low from January 2008
2319 from the September 2008 peak
2320 to 2326.28 is the January 2010 high
2324-2370 is a range of resistance from early 2008
2382-2395 from 2008
Support:
2024 from November 2009
2020 to 2005 from the Q4 2009 peaks
S&P 500: Closed at 1028.06
Resistance:
1040 is the May 2010 low
1044 is the October 2008 intraday high AND the February 2010 low
The 10 day EMA at 1051
1070 is the late September 2009 peak
1078 is the October range low
1084 to 1080 (September 2009 peak)
The 50 day EMA at 1098
1101 is the October 2009 high
1106 is the September 2008 low
The 200 day SMA at 1112
1114 is the November 2009 peak
1119 is the early December intraday high
Bottom of the January 2010 consolidation 1131 to 1136
1133 from a September 2008 intraday low
1151 is the January 2010 peak
1156 is the Sept 2008 low
1170 is the prior March 2010 high
1174 is the May 2010 high
1181 is the April selloff low
1185 from late September 2008
Support:
1020 is the bottom of the late summer 2009 consolidation
946 from June 2009
Dow: Closed at 9743.62
Resistance:
9774 is the May 2010 intraday low
9835 is the late September 2009 peak AND the February 2010 low
9855 is the early September peak in its lateral range
9918 is the September 2008 peak
9829 is the September 2008 closing high
The 10 day EMA at 9927
10,120 is the October 2009 peak
10,285 is the late December consolidation peak
The 50 day EMA at 10,278
The 200 day SMA at 10,361
10,365 is the late September 2008 low
10,496 is the November 2009 high
10,609 from the Mid-September 2008 interim low
10,730 is the January 2010 peak
10,920 is the recent May high
10,963 is the July 2008 low
11,100 from the 7-08 low
11,205 is the April closing high
11,734 from 11-98 peak
Support:
9325 is a late 2008 interim peak
9034 from early 2009 peaks
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
July 06 - Tuesday
ISM Services, June (10:00): 53.8 actual versus 55.0 expected, 55.4 prior
July 07 - Wednesday
July 08 - Thursday
Continuing Claims, 06/26 (08:30): 4600K expected, 4616K prior
Initial Claims, 07/03 (08:30): 460K expected, 472K prior
Crude Inventories, 07/03 (10:30): -2.01M prior
Consumer Credit, May (15:00): -$3.0B actual versus -$3.0B expected, $1.0B prior
July 09 - Friday
Wholesale Inventories, May (10:00): 0.4% expected, 0.4% prior
End part 1 of 3
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