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Weekly market recap: Dow and S&P reach new highs

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For the week ending June 21, 2014, the markets again advanced to new highs on this relentless rally. Fed Chair Janet Yellen's public statements on Wednesday ignited the most recent gains, bolstered by mainly positive economic news.

This is the sixth consecutive day of advancement in both the Dow and S&P, with the Dow reaching a new high of 16,978.02 and the S&P reaching a new high of 1,963.01. If the pundits are right, the S&P could exceed 2,000 by next week.

The economic news was mostly positive. Jobless Claims continue to decline with a drop in new claims for the prior week of -6,000 to 312,000; and continuing claims falling 54,000 to 2.561 million.

The Philadelphia Fed Survey's general business index showed strong growth in manufacturing with the index reaching 17.8 (vs. 13.0 expected). This is the strongest rate of monthly growth since last October.

The situation in Iraq is fluid, with the Kurds entering the fray. In the interim, oil prices continue to rise as the struggle for control of the oil refineries continues. Oil rose for the second day, with the futures (/CL) rising to $106.64 per barrel at the close.

With rising markets comes renewed M&A (mergers and acquisition) action. The amount of M&A action has reached levels not seen since just prior to the financial meltdown in 2008. At the end of this month, the current quarter will be the biggest for M&A since the 2002-2007 bull market ($952 billion in announced deals).

Treasuries continue their losses, now in its third week, as stocks continue to rally and short-term rates (per the Fed) will remain unchanged till mid 2015.

With Bank of America (BofA) facing a $12 billion Federal fine for shoddy mortgage practices, BofA has requested to meet with the Attorney General, Eric Holder. The purpose of the meeting: to discuss a multi-billion dollar settlement. BofA may face as much as $18 billion in fines when State fines are included.

The focus next week in the U.S. will be Housing (Existing and New Home Sales, S&P Case-Shiller HPI), Consumer (Personal Income and Outlays, Consumer Sentiment), Manufacturing (Durable Goods), and the economy (GDP).

Globally, the focus will be on the EU's PMI Composite Flash and EC Economic Sentiment.

With a moderate amount of economic news and the geopolitical chaos in Iraq, we expect the markets to be choppy next week. The data from the EU will come out on Monday and Friday and could add to the volatility. Pundits are still expecting the S&P to hit 2,000 by the end of this month.

Year-to-date the markets are up: Dow 2.23%; S&P500 6.20%; Nasdaq 4.58%.

The Markets for the past week were: DJIA up 1.0%; S&P500 up 1.4%; Nasdaq COMP up 1.3%.

Commodities (ETFs) for the past week were: Gold (GLD) up 2.88%; Silver (SLV) up 5.87%; Oil (OIH) up 2.46%; Dollar (UUP) down -0.46%; 30-yr Bonds (TYX) rose 4 basis points to 3.45%.

The VIX this past week (a measure of market sentiment and volatility) dropped to 10.85% due to the Fed Chair Janet Yellen's public remarks and good economic news.

To see what's on the calendar for next week, go to the Econoday calendar.

The economic calendar for next week is moderate: on Monday – PMI Manufacturing, Existing Home Sales; on Tuesday – S&P Case-Shiller HPI, New Home Sales, Consumer Confidence; on Wednesday –Weekly EIA Petroleum Status Report, Durable Goods Orders, GDP; on Thursday –Weekly Jobless Claims, Personal Income and Outlays; and Friday – Consumer Sentiment.

If you're trading options, we suggest Put Credit spreads for next week at 1.5 standard deviations or greater.

For more information about options, see the 'Suggested by the author' links below.

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