U.S. markets were sluggish on Friday’s open following fresh threats from the White House to impose additional tariffs on Turkey.

However, late afternoon news to end the U.S/ China trade gave the major indexes a lift, with meetings culminating between President Trump and Chinese leader Xi Jinping at multilateral summits in November.

The move represents an effort on both sides to keep an acrimonious trade impasse from sinking the U.S./ China relationship. Volatility closed below a key level of support to end the week and is showing signs of another retest to lower lows.

The Dow jumped 0.4% after trading to a session high of 25,728.

Resistance at 25,600 and the prior August high of 25,692 was cleared with fresh hurdles at 25,800-26,000.

The Russell 2000 also added 0.4% following the late session run to 1,693. The close above 1,690 keeps fresh resistance at 1,700-1,710 and all-time highs on the radar.

For the week, the blue-chips surged 1.4% while the small-caps rose 0.4%.

The S&P 500 advanced 0.3% after testing a high of 2,855. Resistance at 2,850-2,860 was split with the close above the former being a slightly bullish development.

The Nasdaq edged up 0.1% after holding key support at 7,750 shortly after the open. The index held the 7,800 level on the rebound to 7,830 with near-term resistance at 7,875-7,900.

The S&P 500 was up 0.6% for the week while Tech gave back 0.3%.

Real Estate rallied 1% to lead sector strength on Friday.

Consumer Staples and Materials rose 0.8% and 0.7%, respectively. Communication Services fell 0.5% and was the only sector to close in negative territory for a 2nd-straight session.

For the week, Consumer Staples jumped 3.3% while Real Estate and Utilities were higher by 3% and 2.9%, respectively. Energy sank 3.6% and Communication Services fell 1.3%.

Materials and Consumer Discretionary were off 0.4% and 0.2%, respectively.

The earnings season is rapidly coming to a close with Q2 results from over 93% of S&P 500 members having reported.

Total earnings are up 25.5% from the same period last year on 9.9% higher revenues, with 79.2% of the companies beating EPS estimates and 72.8% surpassing revenue estimates.

For the quarter as a whole, total Q2 earnings for the index are expected to be up 24.9% from the same period last year on 9.7% higher revenues.

This exceeds the 2018 Q1’s 24.6% earnings growth, which was the highest quarterly growth pace since 2010.

Revisions have been the only area of somewhat concern in an otherwise very strong earnings quarter.

Estimates for the upcoming 3Q period have modestly come down since the quarter got underway, in contrast to what the market has been seeing in the comparable periods in the preceding three reporting cycles.

Estimates for 2018 Q3 for the S&P 500 index have come down over the last four weeks from 19.6% to a current 18.5%.

The strength in the U.S. dollar and global trade uncertainty have been major contributors for the negative revisions trend and could be a likely sign of things to come going forward.

Global Economy – European markets were mostly lower with many of the major indexes posting a 3rd-straight weekly decline.

The Belgium20 and Germany’s DAX 30 slipped 0.2%. The Stoxx 600 Europe and France’s CAC 40 dipped 0.1%. UK’s FTSE 100 climbed 2 points, or 0.03%.

The Eurozone June current account balance shrank to a surplus of 23.5 billion euros, up from a revised 24.4 billion euros in May, and the smallest surplus in 14 months.

Asian markets were mostly higher despite President Trump efforts to persuade China to offer more at the bargaining table as the two countries prepare for trade talks later this month.

Japan’s Nikkei and Hong Kong’s Hang Seng were higher by 0.4%.

South Korea’s Kospi rose 0.3% and Australia’s S&P/ASX 200 was up 0.2%. China’s Shanghai fell to a new 2-1/3 year low after giving back 1.3%

The yuan strengthened against the dollar on news the U.S. will seek to pressure China to lift the value of the yuan in coming trade talks.

Consumer Sentiment dropped 2.6 points to 95.3 in the August preliminary report, missing forecasts for a print of 97.9.

Leading Economic Indicators rose 0.6% to 110.7 in July, topping expectations for a rise of 0.4% and marking another record high for the index.

New York Fed’s GDP Nowcast model showed a 2.39% rate of growth for Q2, down from 2.57% in the prior report.

Baker-Hughes reported that the U.S. rig count was unchanged at 1,057 rigs, with oil rigs unchanged at 869, gas rigs unchanged at 186, and miscellaneous rigs unchanged at 2.

The U.S. Rig Count is up 111 rigs from last year’s count of 946, with oil rigs higher by 106, gas rigs up 4, and miscellaneous rigs up 1. The U.S. Offshore Rig Count was up 1 rig to 21 and is up 5 rigs year-over-year.

Market Sentiment – Fedspeak returns next week with a keynote speech from Fed Chairman Powell on “Monetary Policy in a Changing Economy” in Jackson Hole on Friday.

Atlanta Fed Bostic will speak Monday on the economic outlook.

The iShares 20+ Year Treasury Bond ETF (TLT) made a run to $121.39 with resistance at $121-$121.25 getting stretched but holding. A more bullish development would occur on continued closes above $121.50.

Support is at $120.50-$120.25 and the 50/ 200-day moving averages. A move below $120 would be a bearish signal.

RSI is giving a neutral reading with resistance at 60.

A move above this level would be a bullish signal for continued strength. Support is at 55-50.

Market Analysis – The Russell 2000 ETF (IWM) traded to a high of $168.47 intraday with strong resistance throughout the month at $168.50 holding.

A close above this level gets July hurdles at $169.50-$170 in play.

Near-term support is at $167-$166.50 and the 50-day moving average. A close below $166 would likely signal another short-term top.

RSI is back in a slight uptrend with July resistance at 60-65. Near-term support is at 50 with a move below this area confirming additional weakness.

The Industrials Select Sector Spider (XLI) was up for the 2nd-straight session after reaching an intraday peak of $76.44.

Fresh resistance at $76.50-$76.75 held with continued closes above $77 and the late July high signaling renewed momentum.

Near-term support is at $75.50-$75. A close below the latter could lead to a further backtest to $74.50-$74 and the 50/200-day moving averages.

RSI is trending higher with resistance at 60. Continued closes above 65-70 would be a more bullish development and signal continued strength.

Support is at 55-50 with a move below the latter signaling additional weakness.

The percentage of S&P 500 stocks trading above the 50-day moving average closed Friday at 65.34% with the high reaching 66.33%. Fresh resistance is at 67.5%-70% as long as the 65% level holds.

The late July peak reached 73.80% on back-to-back sessions. Support is at 60% with risk to 57-55% and the early August lows on a move below this level.

The percentage of Nasdaq 100 stocks trading above the 200-day moving average closed at 61.16% with the session low tapping 59.22%.

This level also represented the high ahead of, and the session after, the July 4th holiday.

Support at 60% held with a move below 59.22% signaling additional weakness towards the 55% area.

Resistance is at 63%-65% with a move above the latter being a slightly bullish development for another test towards the 70% level.

Existing Position Update

Exited TRIP with tiny profit.

Remain bullish on AMZN.

Believe bonds will revert to main trend – which is lower as global tension continues to become priced into the overall market cycle.

Didn’t want to be too aggressive last week since volatility was a bit unpredictable and price was mostly random – due to absence of institutional buyers which causes markets to become more volatile and slightly more unpredictable.

Roger Scott