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A (Mostly) Strong Start to the Second Half

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The Dow had a solid start to the second half on Monday with a jump of 0.61% (or nearly 130 points) to 21,479.3. The S&P contributed with a 0.23% advance to 2429. Financials and energy led the way, helped by a solid ISM Manufacturing Index report that climbed to its highest level in about three years. 

...And then there’s the NASDAQ, which started the second half in the same way it finished the first. The index declined by 0.49% to 6110.1, which is ironic since the market just completed a strong first half thanks mainly to an impressive performance from technology. 

Now we take a day off to celebrate the country’s 241st birthday. When we meet up again on Wednesday, we’ll be in the thick of the turn-of-the-month deluge of economic data, culminating on Friday with the government’s jobs report. And before you know it, a new earnings season will begin. 

Along the way, the editors will be watching tech closely to see when this weakness ends. In today’s highlights section, Jeremy Mullin and Kevin Cook both offer their takes on the NASDAQ (the latter gives his outlook amid a new buy designed to protect from near-term volatility). Other activity in the portfolios today included a new buy from Stocks Under $10 and five swaps in this week’s Black Box Trader adjustment. Read more below: 

Today's Portfolio Highlights: 

Stocks Under $10: Shares of TICC Capital Corp (TICC) have dropped by about $1 over the past few weeks, yet earnings estimates for this business development company have advanced enough to make the stock a Zacks Rank #2 (Buy). Brian sees opportunity in this scenario, so he picked up the stock for the portfolio on Monday. TICC provides capital to companies that are looking to grow organically or through acquisitions. In addition to the advantageous entry point and solid Zacks Rank, the editor is also impressed with its valuation. Read the complete commentary for a lot more on this new addition. 

Black Box Trader: Half of the portfolio was swapped out on Monday, which included three profitable exits. The stocks that were sold today included: 

• Cigna Corp. (CI, +3.6%)
• Caterpillar (CAT, +2.5%)
• Darden Restaurants (DRI, +1.4%)
• Ultra Clean Holdings (UCTT)
• Deere & Co (DE) 

The new buys that replaced these names are: 

• KB Home (KBH)
• BGC Partners (BGCP)
• Hartford Financial Services (HIG)
• Eastman Chemical (EMN)
• UnitedHealth Group (UNH) 

Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing. 

TAZR Trader: The time to buy volatility is at moments of extreme complacency, which is what Kevin is seeing right now. The editor believes that the recent NASDAQ struggles are foreshadowing a generally weaker period in July before moving higher amid earnings season. To protect his NASDAQ-heavy portfolio, Kevin bought a 10% position in ProShares Ultra VIX Short-Term Futures ETF (UVXY) on Monday. The idea here is to circle the wagons as the NASDAQ tests lower supports and then switch to long positions once the bull resumes. The full write-up has more specifics. 

Zacks Counterstrike: "Today was supposed to be a quiet holiday shortened session. However, the Nasdaq didn’t seem to get the memo. While the S&P was relatively strong on the back of financials and energy, tech stocks were very weak. The Nasdaq was sold all day and closed 0.49% lower, while the S&P held its own and closed 0.23% higher.  

"My thoughts on the further tech weakness are that this is more sector rotation and nothing more. We basically hit the 5580 NQ targets on today, printing 5581.25, so we will see if there is a nice bounce off that area on Wednesday.

"Let’s take a look at the Nasdaq futures updated chart. We came very close to hitting targets today with a low of 5581.25 on the contract. This is only 1.25 points away from the targets I have been pointing to for a while. I consider targets hit after coming that close, so it is time to look for the next Fib setup. From the level hit today I would expect a bounce, so if I see some opportunity we will be buyers Wednesday." -- Jeremy Mullin

Have a Happy Fourth of July!
Jim Giaquinto

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