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Momentum continues to accelerate, beware the Fed Minutes

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Momentum continues to accelerate, beware the Fed Minutes

US Stocks started the session off on a positive note on the heels of a strong Nikkei and better than expected earnings from Alcoa (NYSE:AA) .  The metals giant reported slightly better than expected profits lifting the Dow Jones Industrial Average. Yields in the US edged lower allowing stocks some small leeway to edge higher.

US stocks were buoyed early on the heels of solid performance from Asian shares. China’s Shanghai Composite gained 0.4% after data showing June consumer prices rose 2.7% from a year earlier, while producer prices fell 2.7%. Japan’s Nikkei Stock Average rallied 2.6% to close at the highest level since May 24.

Prior to the opening bell, the National Federation of Independent Business said its small-business optimism index for June came in at 93.5, down from 94.4 in May but in line with expectations.

Stocks were lead higher by financials, along with metals and mining which rebounded on the heels of higher gold prices.  Late in the trading session, a strong 3-year action in the US buoyed the entire treasury complex driving down the yield on the 10-year note to 2.64. Additionally, S&P lowered Italy’s rating to BBB, two levels above junk territory, from BBB+. The outlook is negative.

The S&P 500 index technical out is reflecting a positive momentum, as prices are poised to test resistance near 1,680.  Support is seen near the 5-day moving average at 1, 630.The 5-day moving average crossed above the 20-day moving average reflecting that a short term trend is in place.  The MACD (moving average convergence divergence index), recently generated a buy signal and the trajectory of momentum is moving higher.

In recent history, the dates of the Federal Reserve minutes have been unfavorable to stocks.  Wednesday’s release could see some profit taking.

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