U.S. markets were mixed for a 2nd-straight session after China responded to the U.S.’s plan to impose new 25% tariffs on Chinese goods that will take effect August 23rd.

China said it would match that move, with similar tariffs to take effect the same day.

Fresh resistance and January highs were tested and remain in play despite the lackluster action and tough talk. Tech and small-caps showed strength with volatility also pushing January lows.

The Nasdaq extend its winning streak to 8-straight sessions and longest of the year after rising 3 points, or 0.04%, while tapping a high of 7,923. Lower resistance at 7,900-7,925 held for a 3rd-straight session despite the index coming within 10 points of a fresh all-time high.

The Russell 2000 held positive territory for the majority of the session while rising 0.2% and making a run to 1,696 intraday.

Lower resistance at 1,690-1,700 held with a move above the latter getting record highs back in play.

The Dow was slightly lower for a 2nd-straight day after giving back 0.3% following the backtest to 25,492 ahead of the closing bell.

The lower low and 2nd-straight close below the 25,600 level was a slightly bearish development with near-term support at 25,400 needing to hold ahead of the weekend.

The S&P 500 declined 0.1% despite testing an intraday high of 2,862 and also coming within 10 points of fresh lifetime peaks. Support remains at 2,850 with Thursday’s low reaching 2,851.

Materials and Communication Services paced sector leaders after rising 0.5%. Utilities rose 0.4% while Consumer Discretionary and Real Estate gained 0.3%.

Energy sank 1.1% and was the weakest sector. Financials and Industrials were down 0.6%.

Global Economy – European markets showed slight gains for the most part as traders brushed aside tariff tiffs to focus on company earnings.

The Belgium20 gained 0.7% and Germany’s DAX 30 rose 0.3%.

The Stoxx 600 Europe climbed 0.1% and France’s CAC 40 was up a third-point, or 0.01%. UK’s FTSE 100 fell 0.5%.

Asian markets were mostly higher following expectations for fiscal stimulus and Beijing’s announcement of a new government body to oversee the development of the nation’s tech sector.

China’s Shanghai rallied 1.9% and Hong Kong’s Hang Seng jumped 0.9%.

Australia’s S&P/ASX 200 was higher by 0.5% and South Korea’s Kospi added 0.1%. Japan’s Nikkei was off 0.2%.

Japan June core machine orders dropped 8.8%, weaker than forecasts for a pullback of 1% and the biggest decline in 6 months.

China July CPI rose 2.1% year-over-year, stronger than expectations of 2%. July PPI rose 4.6% year-over-year, topping estimates of 4.5%.

Initial jobless claims dropped 6,000 to 213,000, below estimates for a print of 220,000. The 4-week moving average fell to 214,250 from 214,750. Continuing claims rose 29,000 to 1,755,000.

The Producer Prices Index was flat in July, with the core rate 0.1% higher, matching expectations.

Wholesale Trade wholesale inventories were up 0.1% in June, with sales falling 0.1%. The initially reported 0.6% May inventory rise was revised down to 0.3%.

The 2.5% sales pop in May was dropped to 2.1%. For inventories, moderate gains in machinery (0.8%) and computers (0.2%) were offset by declines in autos (-1.2%) and drugs (-0.8%).

Sales weakness resulted in a 3.8% drop in computers. The inventory-sales ratio was steady at 1.25, with May revised up from 1.24.

Market Sentiment – Chicago Fed Charles Evans said rates may need to be more restrictive in years to come as the price environment is still a bit below what he would like.

He now believes the stronger economy may help boost inflation expectations though the tariff situation is increasing uncertainty.

Evans added tariffs are occurring at a time when the economy is doing very strongly and the labor market continues to improve. He believes the unemployment rate could fall to 3.5% by the end of 2020.

He added if inflation holds around 2.2% it would suggest only a modest amount of restrictiveness above our neutral rate might be called for in 2020.

His forecast for the neutral rate is 2.75%, and said he could see the FOMC pushing rates to 3.25%.

The iShares 20+ Year Treasury Bond ETF (TLT) was up for a 2nd-straight session after surging to a high of $119.83. Fresh resistance at $120-$120.25 and the 50/200-day moving averages held.

A close above the latter would be a bullish development signaling additional strength. Rising support is at $119.25-$118.75 with a close below $118.50 signaling additional weakness.

Market Analysis – The Russell 2000 ETF (IWM) traded to a high of $168.71 intraday with lower resistance at $169-$169.50 holding.

IWM is approaching the top end of a longer-term trading range between $166 and $170 that developed throughout July with continued closed above $170-$170.25 being a bullish development. The all-time high is at $170.20.

Near-term support is at $167.50-$167.

A move below $166.50-$166 and the 50-day moving average was 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 55-50 with a move below the latter confirming additional weakness.

The Spider S&P Retail ETF (XRT) extended its winning streak to 6-straight sessions after trading to a fresh record high of $51.34. Blue-sky resistance is at $52-$52.50 on continued strength.

Rising support is at $50.50-$50 with a move below the latter signaling a short-term top. The 50-day and 200-day moving averages remain in solid uptrends.

RSI is pushing resistance at 65.

A close above this level could led to a run towards 70-75.

Support is at 60-55 with a close below 50 being a bearish development.

Existing Position Update

TSLA is reverting back to fair value. This is a great example of buying pressure caused by retail public instead of institutional volume – one will keep the price higher while the other one will revert back – since retail volume cannot sustain long term accumulation like funds can.

TRIP is stable and price is moving higher. I’m expecting more upside over the near term.

Expect AMGN to hover near current price territory  – and keep eye on overall biotech index.

Roger Scott