U.S. markets showed continued strength while pushing early August resistance levels following today’s gains. All major sectors contributing to the rally with Health Care surging 1.7%. For the month of August, the bulls quietly overtook the bears to get the overall wins on the Dow, S&P 500, and Nasdaq.
The bears grabbed victory in the small-caps with the Russell 2000 closing lower for the month. Traders will be jockeying for position ahead of a three-day weekend with the U.S. markets closed on Monday in observance of Labor Day.
Global Economy – European markets were up with mining stocks leading the way higher, as optimism in the global economic outlook pushed copper to nearly a 3-year high. The FTSE 100 advanced 0.9% while the Stoxx Europe 600 gained 0.8%. France’s CAC 40 index gained 0.6%.
The Belgium20 and the DAX 30 added 0.4%.
The European Union’s annual inflation rate rose to 1.5% from 1.3% in July, topping the 1.4% rate economists had expected.
The Eurozone July unemployment rate remained unch at 9.1%, right on expectations.
Asian markets were mixed despite China manufacturing PMI unexpectedly rising. Australia’s S&P/ASX 200 advanced 0.8%. Japan’s Nikkei jumped 0.7%. Hong Kong’s Hang Seng Index and South Korea’s Kospi were lower by 0.4%. China’s Shanghai index dipped 0.1%.
China August manufacturing PMI unexpectedly rose 0.3 to 51.7, topping expectations of -0.1 to 51.3. The official services PMI, however, fell to 53.4 in August from 54.5 in July.
Japanese industrial production data missed expectations, contracting 0.8% month-over-month in July.
U.S. initial jobless claims rose 1,000 to 236,0000 in the week ending August 26th. Estimates were for 237,000 jobless claims.
U.S. personal income rose 0.4% while spending increased 0.3% in July.
The Chicago manufacturing PMI was unchanged at 58.9 in August.
Market Sentiment- Atlanta Fed’s Q3 GDPNow estimate was again cut to 3.3%, down slightly from 3.4% previously, and its inaugural forecast of 4.0% originally.
The iShares 20+ Year Treasury Bond ETF (TLT) traded to a morning low of $127.57 with slightly rising support at $127.25-$127 holding. Upper resistance at $127.75-$128 was cleared and nearly held into the close after peaking at $128.03. Fresh hurdles are at $128.50-$129 on continued closes above the $108 level.
Market Analysis- The Russell 2000 ETF (IWM) made a solid recovery of its 200-day moving average on Tuesday and just missed holding its 50-day moving average with today’s action falling shy of the $140 level. IWM has been in a strong uptrend since bottoming near the $134 level.
The rebound off the double-bottom faces near-term resistance at $140-$140.50 followed by $141 and a flattening 50-day moving average. Continued closes above the $141 level would be a very bullish development for a possible run at all-time highs north of $144.
Rising support is at $139-$138.50.
The Energy Select Spider (XLE) is still trying to form a base of support around the $62.50-$62 levels. The recent 52-week lows tapped $61.81 and $61.80 on August 18th & 21st, respectively.
A move below $61.75 would be a very bearish development for a further backtest to $60. Current resistance is at $63.50-$64.
All the best,
Roger Scott