U.S. markets showed overall strength for the first time in 5 sessions following Tuesday’s push to prior resistance levels as Turkey’s currency meltdown showed signs of steadying.
The Turkish Lira rallied nearly 5% against the green-back following parabolic drops to historic lows against the U.S. dollar.
News of a possible trade deal between the U.S. and Mexico also helped fuel the rebound along with another solid report on business optimism.
Volatility sank nearly 10% but remains slightly elevated after key support levels held into the closing bell.
The Russell 2000 surged 1% while making a midday run just south of 1,695.
The move back above the 50-day moving average was a bullish development and keeps fresh resistance at 1,700-1,710 and all-time highs in play.
The Nasdaq was higher by 0.7% after testing to an intraday peak of 7,888.
Lower resistance at 7,875-7,900 held with a close above the latter being a bullish signal.
The S&P 500 added 0.6% following the push to 2,843 for the 2nd-straight session. Resistance at 2,850 stood tall with continued closes above this level signaling a possible near-term bottom.
The Dow advanced 0.5% after trading to a late session high of 25,339.
Upper resistance at 25,200-25,400 held with the close above the latter being a slightly bullish signal.
Consumer Discretionary and Financials rallied 0.9% to lead sector strength.
Materials added 0.8% while Communication Services and Industrials were up 0.7%.
There were no sector laggards.
Global Economy – European markets barely showed a pulse while settling on both sides of the ledger following mixed economic news.
The Belgium20 climbed 0.2%. Germany’s DAX 30 added a tenth-point while the Stoxx 600 Europe inched up 1/100th of a point.
UK’s FTSE 100 gave back 0.4% and France’s CAC 40 fell 0.2%.
The German August ZEW survey expectations of economic growth rose 11 to -13.7, stronger than expectations of for a gain of 3.4 to -21.3.
Eurozone Q2 GDP was revised upward to 0.4% quarter-over-quarter and 2.2% year-over-year, topping forecasts for no change of 0.3% 2.1%, respectively.
Eurozone June Industrial Production fell 0.7%, weaker than expectations for a decline of 0.4%.
The UK June ILO unemployment rate unexpectedly slipped 0.2% to 4%, better than forecasts for no change at 4.2%. UK June average weekly earnings rose 2.4%, below expectations of 2.5%.
June average weekly earnings ex-bonus rose 2.7%, matching estimates.
Asian markets were mixed with China’s markets lower on soft economic data.
Japan’s Nikkei surged 2.3%. Australia’s S&P/ASX 200 was up 0.8% and South Korea’s Kospi rose 0.5%.
Hong Kong’s Hang Seng dropped 0.7% and China’s Shanghai slipped 0.2%.
China July Industrial Production rose 6% year-over-year, weaker than forecasts of 6.3%.
China July retail sales gained 8.8% year-over-year, below estimates of 9.1%.
July NFIB Small Business Optimism Index level checked in at 107.9, topping estimates of 107.1, while setting another record high.
The percentage of companies expecting a better economy improved to 35% from 33%, with hiring expectations rising 3% to 29%.
Positions not able to fill up 1% to 37%. The index of a good time to expand increased to 32% from 29%. Net compensation plans edged up to 22% from 21%. Plans to hire rose to 23% from 20%, with plans to increase capital spending up 1% to 30%.
U.S. chain store sales dropped 1.2% in the week ending August 11th, largely reversing the 1.4% bounce in the prior week.
The 12-month pace climbed to 3% year-over-year from 2.6%. The report showed sales have been paced by back-to-school shopping, aided by tax holidays in several states.
Dollar and discount stores continued to lead the way.
July Import Prices were flat and Export Prices fell 0.5%, weaker than analysts expected. On a 12-month basis, import prices are up 4.8% year-over-year versus 4.7%, with export prices slowing to 4.3% from 5.3%.
U.S. household debt rose $82 billion to $13.29 trillion in the second quarter of 2018. It represented the 16th-straight quarter with an increase, with the total now at $618 billion higher than the previous peak of $12.68 trillion, from the third-quarter of 2008.
Additionally, overall household debt is now 19.2% above the post-financial-crisis trough reached during the second-quarter of 2013.
Redbook Store Sales were up 4.5% for the year in the week ending August 11th.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) was down for a 2nd-straight session following the fade to $120.03 and lower low.
Upper support at $120.25-$120 failed with the close below the 50/200-day moving averages being a slightly bearish development.
Lowered resistance is at $120.50-$120.75.
Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) snapped a 4-session slide following the rebound to $253.55. Lower resistance from late July at $254-$254.50 held.
Continued closes above the latter would be a bullish signal for a run towards $256-$256.75 and last week’s peaks.
Support is at $253-$252.25. A close below $252 would signal additional weakness towards $251-$250. The 50/200-day moving averages remain in strong uptrends.
RSI is back in a slight uptrend with early July resistance at 55-60.
A close above the latter would be a bullish signal additional strength. Support is at 50 with a move below 45 being a warning sign.
Communication Services (XLC) has been trading for nearly 2 months and is the latest sector to be added to the S&P 500 for new subscribers that may not know.
The sector is still evolving and will be adding companies from the Consumer Discretionary sector along with some of the current Telecommunications sector, over the next few weeks.
The later sector will cease to exist once XLC is firmly established.
(It is important to note, Alphabet and Facebook, together, currently make up 45% of XLC, or nearly half)
The index has been in a slight trading range over the past 6 sessions with today’s high tapping $49.63.
The $50 level represents early July resistance and the top of the gap lower that occurred later in the month from the $52 area.
Continued closes above $49.75-$50 would be a slightly bullish development.
Support is at $49.25-$49 with a close below the latter signaling lower lows.
RSI is approaching resistance at 50 with a move above this level signaling continued momentum. Support is 45-40.
Existing Position Update
Liquidated AMGN at reasonable profit.
TRIP moving in our direction.
TSLA is all over the place – but we are seeing consistent downside – which tells me to sit on it one more day…I’m hoping to scratch this trade.
Initiated Bear call on long bond – believe price is going to trade lower in the near term.