🚨 Market Update: Independence Day Edition

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Hello, my Friends!

U.S. markets have taken a pause, closing early two consecutive days ahead of the July 4th Independence Day celebrations. But here's something intriguing: while the stock market is completely closed today, the futures market remains open.

Ever wondered why? Let's break it down:

🌐 Global Market Needs
The futures market caters to international traders across different time zones, it allows continuous trading of commodities, currencies, and indices - even on major holidays like July 4th.

🔐 Risk Hedging (24/7 Protection)
Businesses worldwide rely on futures to manage risk around the clock. It's crucial for commodities such as oil or currencies where prices can swing dramatically overnight, making holiday trading essential.

📊 Continuous Price Discovery
Futures markets keep pricing transparent, providing immediate reactions to global news and economic events - even when U.S. stocks aren't trading. This allows investors to anticipate tomorrow's market sentiment early.

Holiday Silence: Where Did All the Volume Go?

📌 NYSE & Nasdaq Holiday Break
Both major U.S. stock exchanges observe federal holidays, giving traders a scheduled break and ensuring predictable market operations.

📉 Market Maker Activity Paused
Without stock market participation, market makers - critical players in providing liquidity - step away. Their absence means limited liquidity, insufficient reliable market data, and paused options activity.

• Low Volume, Higher Volatility: With fewer participants, futures can become volatile and exhibit wider bid-ask spreads.

• International Influence: Asian and European investors actively trade futures, shaping overnight sentiment and managing risks linked to U.S. equities.

• Early Indicators: Futures trading during holidays often gives an early glimpse into how global developments or geopolitical events might influence tomorrow's stock market session.

Weekly Impulse

While both the S&P 500 and Nasdaq have surged to fresh all-time highs, the Dow Jones Industrial Average has noticeably lagged, creating an intriguing market divergence.

Comprising the top 30 diversified blue-chip companies in the U.S., the Dow often signals key market shifts due to its sensitivity to broader economic momentum.

The big question: Will the Dow ignite a breakout to fresh record highs - or will it spark a overall summer sell-off instead?

🌟Did you know?

• Historical Legacy: Established on May 26, 1896, the Dow Jones is the second-oldest U.S. market index.

• Exclusive Club: The index includes only 30 major U.S. blue-chip companies.

• Unique Weighting: It is a price-weighted index, meaning stocks with higher prices have a greater influence on its movements.

• Investor-Friendly: Due to its limited number of companies, the Dow is simpler and easier to follow compared to broader indices like the Nasdaq Composite or Nasdaq-100.

🚨Key Impulses Driving Volatility:

• Geopolitical Developments: Trump's envoy has announced nuclear talks with Iran scheduled for next week.

• Fed Rate-Cut Expectations: Rate futures currently price in around an 80% likelihood of a Federal Reserve rate cut by September, a significant drop from 98% prior to the recent robust jobs report.

• Tariff Moves: President Trump stated that Vietnam will face a 20% tariff on goods entering U.S. territory and a 40% tariff on transshipments, while U.S. goods entering Vietnam will enjoy a 0% tariff.

• Trade Deadlines: Trump indicated skepticism regarding extending the July 9th trade deal deadline with Japan, expressing doubt about reaching an agreement.

• Tech Restrictions: The U.S. announced plans to curb AI chip exports to Malaysia and Thailand, reflecting ongoing concerns related to China.

📌 Quick Note

With the stock market closed and limited data available, I'm stepping away from the screens today to reset and refresh my mindset ahead of Monday’s open.

Without market-maker volume and key data points to inform trades, it's a perfect opportunity to step back, appreciate what's in front of us, and resist the urge to overanalyze the charts.

Enjoy the downtime - see you fresh on Monday!

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Until next time,
Steve B
Founder, The Daily Impulse

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