U.S. markets rebounded on Thursday after China and the U.S. agreed to resume low level trade talks this month before the next round of $200 billion in tariffs is enacted.

Chinese delegation will meet U.S. representatives led by Under Secretary of Treasury for International Affairs David Malpass in a new series of trade talks to be held later this month.

The major indexes pushed prior resistance but levels that held into the closing bell.

Volatility fell nearly 8% but failed near-term support to give a neutral reading.

The Dow zoomed 1.6% after trading to a session high of 25,607.

Resistance at 25,600 held with continued closes above this level leading to a possible run towards 25,800-26,000.

The Russell 2000 rallied 0.9% while tapping a session high of 1,691.

The move back above the 50-day moving average was a bullish development with fresh resistance at 1,690-1,700.

The S&P 500 gained 0.8% following the midday push to 2,850. Lower resistance at 2,850-2,860 held with a close above the latter being a bullish signal.

The Nasdaq was up 0.4% after testing a first half high of 7,849.

The close back above 7,800 keeps prior resistance at 7,875-7,900 in play.

Consumer Staples soared 1.4% to lead sector strength. Financials and Industrials rose 1.3%.

Communication Services slipped 0.04% and was the only sector in the red.

Global Economy – European markets were higher across the board. UK’s FTSE 100 and France’s CAC 40 were higher by 0.8% and Germany’s DAX 30 advanced 0.6%.

The Stoxx 600 Europe gained 0.5% and the Belgium20 climbed 0.4%.

UK July retail sales ex-auto fuel rose 0.9%, stronger than expectations of no change. July retail sales including auto fuel rose 0.7%, stronger than forecasts of 0.2%.

Asian markets were mostly lower despite news China’s Vice Commerce Minister Shouwen will lead a delegation to the U.S. later this month for trade talks.

South Korea’s Kospi sank 1%.

Hong Kong’s Hang Seng dropped 0.8% and China’s Shanghai fell 0.6%. Japan’s Nikkei slipped 0.1% while
Australia’s S&P/ASX 200 dipped 0.01%.

China July foreign direct investment rose 14.9% year-over-year, the largest increase in 8 months.

The Japan July trade balance was in deficit by -231.2 billion yen, wider than expectations of -41.2 billion yen.

July exports rose 3.9%, below forecasts of 6.3%. July imports rose 14.6%, topping estimates of 14.2%.

Jobless Claims were at 212,000 for the week ending August 11th, slightly below expectations for 215,000. The 4-week moving average is at 215,500.

Continuing claims dropped 39,000 to 1,721,000 in the week ending August 4th.

The August Philadelphia Fed Business Outlook Survey checked in at 11.9, well below estimates of 22.5.

The employment component slipped to 14.3, while the workweek fell to 10.7. New orders plunged to 9.9 from 31.4. Prices paid declined to 55, with prices received at 33.2.

The 6-month general business index improved to 38.8 following July’s slip to 29. The future employment gauge rose to 32.1, with new orders at 38.1 and capital expenditures at 27.1, while prices paid were at 60.2, and prices received at 58.9.

Housing Starts starts rebounded a tepid 0.9% to 1,168,000 in July, below forecast for a 1,260,000 pace. Starts are down 1.4% year-over-year.

Building permits bounced 1.5% to 1,311,000 while single family starts rose 0.9% to 862,000. Multifamily starts bounced 0.7% to 306,000.

Regionally, sales rose in the Midwest (11.6%) and the South (10.4%), and declined in the West (-19.6%) and the Northeast (-4%).

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) was slightly lower after trading down to $120.38 intraday. Support at $120.25-$120 held.

Resistance remains at $121-$121.25 held. A golden cross is in the process of forming with the 50-day moving average on track to clear the 200-day moving average.

This is usually a bullish development that can lead to higher highs.

Market Analysis – The PowerShares QQQ (QQQ) was up for just the 2nd time in 6 sessions with Thursday’s peak reaching of $180.99. Prior resistance at $180.50-$181 held with continued closes above the latter being a slightly bullish signal.

Support is at $179-$178.50 with additional weakness towards $177.50-$177 and the 50-day moving average on a move below the latter.

RSI is giving a neutral reading with resistance at 55-60 with the latter representing the monthly high.

Support is at 50-45 with a close below the latter likely leading to additional selling pressure.

The Materials Select Sector (XLB) tested a high of $58.32 with resistance at $58.25-$58.50 holding.

Support is at $57.50-$57 with a close below the latter likely signaling additional weakness towards the $56 area and early May lows.

The 50-day moving average is rolling over and is signaling additional weakness.

RSI is in a slight uptrend with resistance at 45-50. Support is at 40 with a mobe below this level being a bearish signal.

Current Position Update

All three positions moving towards profit zone. I should have another spread before end of the week if market holds current price level.

All the best,
Roger Scott.