U.S. markets were mixed on Wednesday as strength in the blue-chips outweighed the weakness in Tech and the small-caps.
January resistance levels remains in play for the Dow while near-term and fresh support levels held for the other major indexes.
Economic news was better-than-expected and volatility slipped to its lowest levels in 4 weeks.
The action is still suggesting higher highs over the near-term and ahead of 3Q earnings season that starts in early October.
The Dow jumped 0.6% after reaching an intraday peak of 26,464.
Lower and fresh support at 26,400-26,600 held with the all-time high at 26,616.
The S&P 500 gained 0.1% following the intraday push to 2,912. New resistance at 2,925-2,950 remains in play on a close above the all-time high at 2,916.
The Nasdaq slipped 0.1% after testing an intraday low of 7,917.
Upper support at 7,900-7,875 and the 50-day moving average easily held with a close below the latter being a warning signal.
The Russell 2000 slipped 0.5% following the backtest to 1,700 and the 50-day moving average.
Upper support at 1,700-1,690 held with a close below the latter being a bearish development.
Financials zoomed 1.7% to led sector strength while Materials surged 1.1%.
Utilities tanked 2.2% and easily led sector laggards while Real Estate fell 1%.
Global Economy – European markets closed higher across the board despite chatter that Prime Minister Theresa May was going to reject a new offer by the European Union to solve the Irish border issue.
France’s CAC 40 was higher by 0.6% and Germany’s DAX 30 added 0.5%.
UK’s FTSE 100 was up 0.4% and the Stoxx 600 Europe rose 0.3%. The Belgium20 climbed a point, or 0.03%.
UK August CPI rose 0.7% month-over-month and 2.7% year-over-year, stronger than expectations of 0.5% and 2.4%. August core CPI rose 2.1% year-over-year, topping forecasts of 1.8%.
Eurozone August new car registrations jumped 31.2% year-over-year to 1.134 million, the largest increase since the data series began in 2004.
Asian markets showed continued strength as Japan’s leading index got a boost from added gains for dollar-yen and bond yields while China’s markets shrugged off new tariffs.
Hong Kong’s Hang Seng advanced 1.2% while China’s Shanghai and Japan’s Nikkei rallied 1.1%.
Australia’s S&P/ASX 200 advanced 0.5%. South Korea’s Kospi slipped a half-point, or 0.03%.
The Japan August trade balance was in deficit by -444.6 billion yen, narrower than expectations of -483.2 billion yen. August exports rose 6.6% year-over-year, stronger than forecasts of 5.2%.
August imports rose 15.4% year-over-year, topping estimates of 14.5%.
The BOJ kept its benchmark target interest rate at -0.1% and its 10-year yield target at 0%.
BOJ Governor Kuroda said the BOJ won’t quit easing before inflation reaches the BOJ’s 2% target.
MBA Mortgage Applications rose 1.6%, in addition to a 0.3% increase in the purchase index and a 3.7% gain in the refinancing index for the week ending September 14th.
The 30-year mortgage rate rose 4 basis points to 4.88% to mark the highest level since April 2011.
Housing Starts rose 9.2% to 1.282 million in August, topping expectations for a print of 1.24 million. Housing Starts are now 9.4% higher on a year-over-year basis versus -0.9% in July.
Building permits dove 5.7% to 1.229 million from a revised 0.9% gain to 1.303 million and below expectations of 1.32 million.
Current Account deficit narrowed to -$101.5 billion after widening to -$121.7 B in Q1, and better-than-expectations of -$104 billion. The balance on goods and services was -$133.8 billion versus -$154 billion.
The balance on goods was -$203.2 billion from -$220.8 billion.
The services surplus was $69.3 billion from $66.8 billion.
The primary income balance dipped to $60.8 billion from $61.2 billion while the secondary income balance was little changed at -$28.5 billion deficit versus -$28.9 billion.
Atlanta Fed’s Q3 GDPNow estimate was unchanged at 4.4%.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 3rd-time in 4 sessions after tanking to a $116.19 shortly after the open.
May support at $116.25-$115.75 held with a move below the latter getting $115 and fresh 52-week lows in play.
Lowered resistance at $117-$117.50.
Market Analysis – The Spider S&P 500 ETF (SPY) closed higher for a 5th time in 6 sessions after reaching a peak of $291.69. Near-term resistance at $291.50-$292 held with the late August all-time high at $291.74.
A close above $292 could lead to a run towards $294-$295 over the near-term.
Rising support is at $290-$289.50. A move below $288.50 would be a slightly bearish development with risk towards $287.50-$285.
RSI is pushing resistance at 65 with continued closes above the latter leading towards 70-75 and August peak levels.
Support is at 60 with a move below 55 being a bearish development and signaling another short-term top.
The Consumer Staples Select Spiders (XLP) has traded in a tight range between $54.50-$55 over the past 5 sessions.
Wednesday’s peak reached $54.91 with a close above $55 getting December resistance at $55.50-$56 in play.
A close below $54.50 would be a slightly bearish signal for a continued retest towards $54-$53.75 and the 50-day moving average.
A golden cross formed in late August with the 50-day moving average clearing 200-day moving average to form a golden cross.
This is typically a bullish technical pattern for higher highs.
RSI has been in slight downtrend with support at 55.
A close below this level will likely signaling additional weakness with risk to 50 and the August lows. Resistance is at 60.
Current Position Update
Markets are all over the place…with Dow rising and tech dumping.
AMAZON remains volatile and I’m anticipating mild upside next few sessions.
GOOG is fairly flat on the session with lower volatility…should help reduce premium next few sessions.
BABA seeing major downside pressure – anticipate price to begin reverting back with the main trend.
Bonds are extremely oversold – expect few days of bounce to the upside ahead. Especially if Blue chips begin seeing minor weakness.
Roger Scott.