U.S. markets settle mostly lower on heightened China/U.S. trade tensions while trading in less than a 1% range.
News the U.S. would begin imposing a 25% tariff on an additional $16 billion in Chinese imports in two weeks weighed on sentiment.
The mixed session showed some bullish signals as Tech closed higher and volatility settled lower despite the choppy session.
The Dow dipped 0.2% after trading down 25,557 while snapping a 3-session winning streak.
The blue-chips closed just below the 25,600 level but has wiggle room down to 25,400 before we can say a short-term top is in.
The S&P 500 was down less than a point, or 0.03% after trading in a 9-point range while snapping a 4-session winning streak. Support at 2,850 held on the backtest to 2,853.
The Nasdaq added 0.1% to extend its winning streak to 7-straight sessions while trading to a high of 7,901. Lower resistance at 7,900-7,925 held for a second-straight session to give a slightly cautious signal.
The Russell 2000 slipped 0.1% following the intraday pullback to 1,677. Support at 1,680-1,675 was split but levels that held into the closing bell.
Technology and Financials showed the most sector strength after rising advancing 0.3%.
Healthcare was up 0.2% while Consumer Discretionary climbed 0.1% to round out the winners.
Consumer Staples sank 0.8% and was the weakest sector. Energy and Real Estate fell 0.7% and 0.6%, respectively.
Global Economy – European markets were mostly lower amid lingering concerns about the country’s exit from Europe’s trading partners.
Worries about Brexit have persistently weighed on the pound although the weakness has given some lift to companies doing business abroad.
The Belgium20 gave back 0.5% and France’s CAC 40 fell 0.4%. The Stoxx 600 Europe was down 0.2% and Germany’s DAX 30 was off 0.1%. UK’s FTSE 100 rose 0.8%.
Asian markets were mixed after the Trump administration confirmed it would impose 25% tariffs on $16 billion in Chinese imports later this month.
China’s Shanghai dropped 1.2% while Japan’s Nikkei slipped 0.1%. Hong Kong’s Hang Seng gained 0.4% and Australia’s S&P/ASX 200 advanced 0.2%.
South Korea’s Kospi was up 0.1%.
The China July trade balance was in surplus by $28.05 billion, below expectations of $38.92 billion.
July exports rose 12.2% year-over-year, topping forecasts of 10%. July imports jumped 27.3% year-over-year, well ahead of estimates of 16.5%.
Japan July bankruptcies fell 1.68% year-over-year, the fourth consecutive month that bankruptcies have declined.
The Japan July eco watchers survey outlook fell 1 to a 16-month low of 49, weaker than expectations for a slip of 0.1 to 49.9.
The July eco watchers survey current fell 1.5 to a 22-month low of 46.6, weaker than forecasts for a print of 48.
MBA Mortgage Applications were down 3% for the week ending August 3rd.
Market Sentiment – Richmond Federal Reserve Bank President Tom Barkin said the labor market is really tight and inflation is at target.
He said tariff concerns are rising and the economy faces geopolitical risks, market volatility and the effects of higher interest rates.
He added that if the economy needed stimulus in the future, the Fed might employ unconventional policies like those after the Great Recession.
Barkin said the Fed should continue to raise rates, as the Fed’s benchmark rate is not yet back to normal and a gradual path of rate increases seems sensible.
He mentioned his business contacts are concerned about tariffs, though he believes that tit-for-tat tariffs are likely to cancel out in terms of the effect on U.S. inflation.
The iShares 20+ Year Treasury Bond ETF (TLT) tested an intraday high of $119.03.
Lower resistance at $119-$119.50 held with a close above the latter signaling a possible short-term bottom.
Support remains at $118.50-$118 with a move below the latter signaling additional weakness.
Market Analysis – The PowerShares QQQ (QQQ) extended its winning streak to 5-straight sessions after trading to a high of $182.35. Fresh resistance at $182.50-$183 held with the record high from late July at $182.93.
Continued closes above $183 could lead to a breakout towards $184.50-$185 and fresh all-time highs.
Rising support is at $181-$180.50.
A close below $180 could signal another short-term and possible double top with additional weakness towards $177.50-$176 and the 50-day moving average.
RSI has been in a steady uptrend with resistance at 65-70.
Continued closes above the latter and June highs would be a slightly bullish signal for continued strength towards 75-80 and January peaks. Support is at 60-55 with a close below the latter likely leading to additional selling pressure.
The iShares PHLX Semiconductor ETF (SOXX) closed higher for a 5th-straight session after making a run to $190.90.
Early June resistance at $191-$191. 50 held with a move above the latter getting $192.50-$195 in play, depending on momentum.
Near-term support is at $189-$188.50 with a close below the latter signaling additional weakness towards $187.50-$186 and the 50-day moving average.
RSI is approaching resistance at 65-70 with a move above the latter signaling continued strength. Support is at 60-55.
Existing Position Update
TSLA continues to behave irrationally…want to see if price will unwind over the near term. I honestly can’t see serious long term buyers coming in on this news – but the world is changing!
NTAP remains of the most stable and strongest stocks and I want to capitalize on it being slightly undervalued according to our model.
I may turn NTAP into iron condor but I’m not seeing excessive upside in the overall market at this time – which is the reason why I’m turning to one of the strongest stocks at this time.
I’m looking for a few more opportunities, but don’t want to rush – since market is becoming increasingly vulnerable.