The indices rested on Friday but volume was much higher than normal due primarily to the rebalancing of various S&P indices. The Russell indices rebalance at the close this coming Friday so there will be a very large spike in volume then. It is important to keep in mind that the rebalancing requires brokers to accumulate shares that can then be crossed at the close. This means there may be some unusual action in stocks that are being added or dropped during this week. This is not as easy to 'game' as many think, so be careful if you are playing that game.
In addition to index rebalancing, the main focus this week will be the upcoming G-20 meeting this coming Friday in Japan. It is still uncertain whether President Trump will be meeting with Chairman XI but the market will be highly reactive to any headlines.
Overall expectations for a quick deal on China trade are very low which means that a surprise positive headline has a greater capacity to move the market. There is much skepticism about a deal and that is a market positive right now.
The other big issue that has been supporting the market is anticipation of Fed interest rate cuts. That means that any weak economic news is going to increase hopes of a half point hike at the July meeting.
Gold and Bitcoin continue to run higher as the dollar continues to see heavy pressure. Bonds are bouncing back as well. These moves all suggest that the market is looking for a dovish Fed to continue to be a driving force in the market.
Technically the indices are somewhat extended and ripe for consolidation but technical conditions continue to look good. The S&P 500 could pullback to 2910 or so and still be in good shape.
One of the bigger positives lately has been strong stock picking. There has been strong action in a number of IPOs despite concerns that there are too many that are soaking up cash. There is nine more this week that may test the market's appetite for new merchandise.
My game plan here is to look for the indices to drift but for some pockets of good trading. I'll be protecting gains and will likely take some profits into strength. I'm not expecting heavy positive momentum but I will be looking for dip buyers to show up on weakness.
My Stock of the Week can be found here.