U.S. markets traded higher on Wednesday as the major indexes continue to work the way towards prior resistance levels. The losses from last Thursday’s pullback have been recovered, excluding the small-caps, and is a slightly bullish sign.
The Dow closed higher for the fourth-straight session but the Russell 2000 is still trying to recover its 100-day moving average. Most sectors traded higher with the exception of energy and a slight dip in the financials.
Global Economy –European markets closed higher with exporters and mining companies getting a boost from a weaker euro. France’s CAC 40 index and the FTSE 100 were up 0.7%. The DAX 30 and the Stoxx Europe 600 also gained 0.7%. The Belgium20 advanced 0.6%.
The UK ILO unemployment rate unexpectedly fell 0.1 to 4.4% for the three months through June, topping expectations of no change at 4.5%.
UK July jobless claims fell 4,200, the biggest decline in 5 months.
ECB President Draghi will not deliver a fresh policy message at the annual Fed symposium later this month in Jackson Hole. Wall Street has been speculating for some time that Mr. Draghi would use the speech as an opportunity to talk about trimming the ECB’s monthly bond buying.
Asian markets settled mixed after South Korea’s president called for renewed talks with the North, saying that the U.S. would need Seoul’s consent for any military action on the Korean Peninsula, which helped to ease tensions.
Hong Kong’s Hang Seng Index advanced 0.9% while South Korea’s Kospi index climbed 0.6%. Australia’s S&P/ASX 200 added 0.5%. Japan’s Nikkei Stock Average and China’s Shanghai index slipped 0.1%.
U.S. Economy-The MBA mortgage market index rose 0.1%, with a 1.5% drop in the purchase index and a 1.6% rise in the refinancing index for the week ending August 11th.
U.S. housing starts dropped 4.8% in July to a 1.155 million clip, weaker than the 1.23 million forecast. Single family starts dropped 4.8%, while multifamily starts dipped 0.5%.
In energy news, API reported yesterday that crude inventories for the week of August 11th fell 9.2 million barrels.
Market Sentiment –FOMC minutes showed most members still expect inflation to pick up over the medium term while preferring to defer the announced balance sheet unwinding until the upcoming September 19th-20th meeting. Some participants believed there was room for the FOMC to be patient on further rate hikes while others saw inflation moving on a clear path toward the 2% target and were concerned about the effect of a tighter labor market.
The bank had signaled it would raise its benchmark fed-funds rate one more time this year, but the surprising slowdown in inflation may have forced the FOMC to reconsider.
On the appropriate pace of normalization of the funds rate, the FOMC fell back to acknowledging it would depend on how financial conditions evolved. As a result, a majority of investors now believe the Fed will hold off until early 2018.
The iShares 20+ Year Treasury Bond ETF (TLT) was weak during the first half of trading with the low reaching $124.72. Support at $125-$124.50 and the 50-day moving average held for the second-straight session. There is risk to $123 and the 100-day moving average on a close below the latter.
Upper resistance at $125.50-$126 was cleared with the close above the former a slightly bullish development.
Market Analysis-The PowerShares QQQ closed higher for the 4th-straight session after testing a high of $144.96. Current resistance at $145-$145.50 held with a move above the latter getting fresh all-time highs north of $146 in play. The current record high is at $145.96.
Support is at $144-$143.50 with backup help at $142-$141.50 and the 50-day moving average.
Gold traded lower for the second-straight session after an attempt of a triple-top breakout above the $1,300 level. Continued closes above this level would be a very bullish development for a possible breakout towards $1,350-$1,400 at some point.
Current support is at $1,275-$1,270 with a move below the latter likely leading to a further backtest to $1,260-$1,255 and the 50/100-day moving averages.
All the best,