Summer Heat Scorches Europe and U.S.

Europe flares as summer heat continues

Summer heat covers the nation as Europe’s debt crisis flares again.

On My Wall Street Radar

In the chart of the S&P 500 above (NYSEARCA:SPY) we can see how the sideways channel between 1380 and 1330 continues to form. RSI is starting to decline, along with MACD, as the summer doldrums continue.

View From The Summit

Last week’s economic reports brought spots of sunshine to the housing market with the NAHB Home Builder Index rising, along with a strong June Housing Starts report.

Equity markets were rallying most of the week in response to relatively positive earnings reports and hopes for more easing by Dr. Bernanke and the Federal Reserve.

But on Friday, Europe raised its ugly head again as Spanish bond yields climbed back into the red zone above 7% and Valencia, one of its regions, reported that it would need help from the central government which has difficulties of its own. As many as six Spanish regions could be lining up for financial help from the central government. Austerity and recession is likely to continue.

U.S. stock indexes fell in response to the renewed threat with the Dow Jones Industrial Average (NYSEARCA:DIA) dropping 120 points, 0.93%, the Nasdaq 100 (NYSEARCA:QQQ) sliding 1.4% and the Russell 2000 (NYSEARCA:IWM) slipping 1.3%.

At home, U.S. Retail Sales were down in June for the third month in a row and the Philadelphia Fed report declined more than expected while existing home sales continued their decline.

For the week, the S&P 500 (NYSEARCA:SPY) gained 0.4% for the week, the Dow Jones Industrial Average (NYSEARCA:DIA) was also up 0.4% for the week and the Nasdaq (NYSEARCA:QQQ) added 0.6%.

Agriculture ETFs remain hot as

The Midwest continues its record heat wave which is sending shock waves through the agricultural commodity world.

Supplies are threatened and crop failure is being discussed as summer wears on. June was the fourth hottest month ever, according to the National Oceanic and Atmospheric Association.

Most analysts forecast higher prices ahead as the drought is forecast to continue into late July.

Soybeans have reached record highs and corn is also near a record high on commodity futures exchanges.

Agricultural ETF prices have seen sharp rises with PowerShares Agriculture ETF (NYSEARCA:DBA) up more than 10% in a month, Tecrium Corn (NYSEARCA:CORN) advancing more than 30% since mid-June and Tecrium Soybean ETF (NYSEARCA:SOYB) up 8% over the last two weeks.

Next week brings important economic and earnings reports.

On the economic front, Monday brings the Chicago Fed report, Tuesday sees Markit Flash PMI, Wednesday is new home sales, Thursday highlights weekly jobless claims, durable goods and pending home sales and Friday focuses on Q2 GDP and University of Michigan Consumer Sentiment.

On the earnings front, notable reports will come from McDonald’s on Monday, Apple on Tuesday, Boeing, Pepsi, Ford and Caterpillar on Wednesday and Facebook on Thursday.

Bottom line: Stocks and ETFs remain in a volatile, sideways channel as summer drags on. Expect more volatility as summer wears on and Europe smolders.

Get Wall Street Sector Selector’s Free Stock Market Warning Indicator!