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Looking outside the norm...



Economic Influence: Consumer Confidence for July is expected to increase to 85.0 from a prior reading of 83.5, according to First Tennessee Chief Economist Chris Low. This reading should have a limited impact on the market as most of the volatility of the week should come with a slew of reports on Friday including the July Payroll numbers. Recent economic releases (Retail Sales, Weekly Jobless Claims and Durable Goods) have beaten expectations so a positive surprise in Consumer Confidence would likely be greeted as "more of the same" - and therefore have less of a positive influence.

Earnings Influence: With most of the major companies already announcing "good enough" results, we don't see any new news that could alter the outlook that earnings are good enough to hold stocks up, but not good enough to generate further gains through the upper end of the recent trading range.

Other Influences and Thoughts: The market has been in the consolidation or transition mode since the beginning of June. That also coincides with the beginning of a correction in the Euro. While it hasn't always been the case, since the beginning of the year there has been a solid correlation between the strength in the Euro and the S&P 500. When the Euro mounts significant upside, so too has the SPX and when the Euro has been in consolidation or correction mode, again so too has the market (Exhibit 1). This relationship may offer some clues toward future movement, especially if the European currency begins a turn that coincides with a break above the SPX trading range (1015).

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