U.S. markets rebounded on Tuesday to close higher following the worst trading day of the year to start the week.
The gains helped the major indexes snap multi-session losing streaks with near-term resistance levels holding into the closing bell.
Aside from the Nasdaq, the major indexes posted an inside session, meaning higher highs and lower lows were avoided.
This is typically a neutral signal with more follow through needed to determine the next possible trend.
Volatility settled lower but held a key level of support to keep things interesting.
The Nasdaq snapped a 6-session losing streak after rallying 1.4% and reaching a second half high of 7,845.
Near-term and lower resistance at 7,850-7,900 held with more important hurdles at 7,950-8,000 and the 50-day moving average.
The S&P 500 soared 1.3% while trading to an intraday high of 2,884. Lower resistance at 2,875-2,900 was tripped and held with additional hurdles at 2,925 and the 50-day moving average.
The Dow jumped 1.2% following the run to 26,038 ahead of the closing bell.
Near-term and lower resistance at 26,000-26,250 was cleared and held with a close above 26,500 and the 50-day moving average being a more bullish signal.
The Russell 2000 snapped a 4-session slide after gaining 1% and testing and closing on the late day high of 1,502.
Fresh and lower resistance at 1,500-1,515 was cleared and held with a close above the latter and the 200-day moving average signaling a possible near-term bottom.
Technology and Financials surged 1.7% and 1.6%, respectively, to lead sector strength while Industrials, Communication Services and Consumer Discretionary were up 1.5%.
Energy was the only sector that showed weakness after dipping 0.1%.
Global Economy – European markets settled lower on trade concerns and disappointing economic news out of Germany.
Germany’s DAX 30 was down 0.8% and UK’s FTSE 100 dropped 0.7%. The Belgium20 declined 0.6% and the Stoxx 600 fell 0.5%. France’s CAC 40 slipped 0.1%.
German industrial orders increased 2.5% month-on-month in June, but are still down by 3.6% on the year.
Germany’s July construction PMI came in at 49.5, down from 50 in June and dipping into contraction territory for the first time since October 2018.
Asian markets showed continued weakness as the U.S./ China trade war intensified, after Beijing confirmed it is suspending agricultural product purchases in response to new American tariffs.
Australia’s S&P/ASX 200 plummeted 2.4% and China’s Shanghai stumbled 1.6%. South Korea’s Kospi sank 1.5% while Hong Kong’s Hang Seng and Japan’s Nikkei were lower by 0.7%.
The Chinese central bank set a daily rate for the yuan just under 7 versus the dollar, allowing it to trade in a band against the greenback within 2% of the midpoint value.
This comes after the White House formally accused Beijing of manipulating its currency.
Jolts reported job openings fell 36,000 to 7,348,000 in June, after edging up 12,000 to 7,384,000 in May, and representing the 15th consecutive month above the 7 million mark.
The rate slipped to 4.6% from 4.7% in May while hirings declined 58,000 to 5,702,000. The rate was steady at 3.8%.
Quitters dropped 45,000 to 3,433,000 versus the 38,000 slide to 3,478,000 previously, with the rate unchanged at 2.3%.
Redbook Store Sales were up 5.1% for the year in the week ending August 3rd.
Market Sentiment – St. Louis Fed James Bullard reiterated last week’s quarter-point easing was a mid-cycle adjustment but does not foresee a recession, however.
He said more policy actions might be needed, but added the long and variable lags in policy effects with past moves are just impacting now.
Bullard does not expect trade uncertainties to dissipate anytime soon, though he stated it’s already in the Fed’s calculus.
He said tit-for-tat moves aren’t an escalation of the trade dispute and the Fed should not react to short term stock moves.
So far, he hasn’t seen any intensification of the yield curve inversion, something he’s been keen on monitoring, and would like to see a more upward sloping curve.
The iShares 20+ Year Treasury Bond ETF (TLT) extended its winning streak to 8-straight sessions while closing on its session high of $139.98.
Fresh and lower resistance at $139.50-$140 was cleared and held with blue-sky territory towards $141.50-$142 on continued momentum.
Near-term support remains at $138-$137.50 with a close below $136.50-$136 signaling a possible near-term top.
Market Analysis – The Russell 2000 ETF (IWM) was up for the first time in 5 sessions after tapping a late day high of $149.70. Lower resistance at $149.50-$150 was cleared but held.
Continued closes above $151.50 would be a more bullish signal for a run towards $152.50-$153 and the 50-day moving average.
Current support is at $148-$147.50. A move back below the latter would be an reneweed bearish signal with risk towards $145.50-$145.
RSI is back in an uptrend with resistance at 40. and a level.
A strong move above this level could lead to additional strength towards 45-50. Support is at 35-30 with the latter representing the late May low.
iShares MSCI Emerging Markets (EEM) ended a 6-session losing streak after
testing a session high of $39.81.
Near-term and lower resistance at $39.50-$40 was cleared and held.
The former represents major support from late May with a close above $40 being a more bullish signal near-term selling pressure has abated.
Current support is at $39-$38.50. A close below the latter would signal a false rebound with risk towards $38-$37.50 and fresh 52-week lows.
RSI is in an uptrend with resistance at 30 on oversold conditions.
Continued closes above this level would signal additional strength towards 35-40. Support is at 25-20.