U.S. markets cleared major resistance levels on Thursday on news of easing trade tensions with the U.S. and Chinese governments working on the logistics for a new round of trade talks.

There was also news trade talks between the U.S. and Canada could resume as early as next week with a potential trade deal outlined.

Volatility stayed deflated after closing below a key level of support and is suggesting slight market momentum.

The Nasdaq showed the most strength after rallying 0.8% while reaching an intraday peak of 8,037.

Resistance at the 8,000 level was cleared and held for the first time in 7 sessions with the all-time late August high at 8,133 back in play.

The Dow advanced 0.6% after trading to an intraday high of 26,191. The close above the 26,000 level was a bullish signal with fresh resistance at 26,200-26,400.

The S&P 500 was up 0.5% following its run to 2,906 and close above the 2,900 level.

The recent all-time high is at 2,916 with fluff up to 2,925-2,950 on continued momentum.

The Russell 2000 was the only index to slip into negative territory while finishing with a loss of 0.1%. The 9-point range reached a high of 1,722 with resistance at 1,725-1,730 holding.

Technology showed the most sector strength after rising 1.1%. Health Care and Real Estate were higher by x and 0.x%.

Consumer Staples and Financials were the only sector laggards after giving back 0.2% and 0.1%, respectively.

Global Economy – European markets were mixed after the European Central Bank, Bank of England and Turkey’s central bank announced policy decisions.

Germany’s DAX 30 added 0.2% and the Belgium20 gained over a point, or 0.04%. UK’s FTSE 100 fell 0.4% and the Stoxx 600 Europe slipped 0.2%. France’s CAC 40 dipped 0.1%.

The BOE kept its benchmark interest rate unchanged at 0.75%, as expected, and to maintain its asset purchase target at 435 billion pounds.

The BOE also upgraded its growth forecast as it raised its UK Q3 GDP estimate to 0.5% from 0.4%.

The Central Bank of the Republic of Turkey raised its 1-week repo rate by 6.25% to 24% from 17.75%.

The ECB left benchmark interest rates unchanged with the bank also confirming it will halve bond purchases to 15 billion euros per month from October.

The interest rates on the marginal lending facility and the deposit facility remained unchanged at 0.00%-0.25% and -0.40% respectively

In a subtle change to the bank’s guidance, the ECB announced plans to end bond purchases at the end of year and keep interest rates at record low levels at least through next summer.

Asian markets bounced back Thursday, led by strong gains in Japan and Hong Kong, after the U.S. offered to renew trade talks with China.

Hong Kong’s Hang Seng surged 2.5% while China’s Shanghai soared 1.2%.

Japan’s Nikkei jumped 1% and South Korea’s Kospi climbed 0.1%. Australia’s S&P/ASX 200 sank 0.8%.

Japan August PPI was unchanged month-over-month and rose 3% year-over-year, weaker than expectations of for a rise of 0.1% and 3.1%, respectively.

Japan July core machine orders jumped 11%, topping forecasts of 5.5%.

Initial Jobless Claims fell 1,000 to 204,000 missing estimates for a print of 200,000, but another 48 year low.

The 4-week moving average slid to 208,000 from 210,000. Continuing claims declined 15,000 to 1,696,000.

August Consumer Price Index rose 0.2% in August with the core rate up 0.1%, matching forecasts. There were no revisions to the 0.2% gains in July for both the headline and ex-food and energy indexes.

Compared to last year, CPI slowed to 2.7% year-over-year versus 2.9%, while the core rate came in at 2.2% compared to 2.4%. Energy prices climbed 1.9% from -0.5% while Services costs were up 0.2% from 0.3%.

Housing increased 0.3% versus 0.2%, with the owners’ equivalent rent measure at 0.3%.

Food/beverage prices edged up 0.1%, as they did previously while Apparel prices dropped 1.6% from -0.3% previously. Transportation costs rose 0.9% from 0.3% while Medical care costs fell 0.2%.

Education was 0.2% firmer from 0.2%. Tobacco rose 0.1% from 0.1%. Real average weekly earnings were up 0.5% year-over-year last month from 0.1%.

The Treasury reported a $214.1 billion budget deficit in August, close to expectations, but much deeper than the $107.7 billion red ink amount from last year. Receipts declined 3.2% year-over-year, while spending climbed 29.7% due to calendar effects with September outlays moved up.

For the fiscal year to date, the deficit totals $898.1 billion, versus the $673.7 billion shortfall for the same 11-month period, with receipts 0.6% higher year-over-year, while spending was up 6.7%.

Market Sentiment – Atlanta Fed Raphael Bostic said rate increases can continue gradually for a handful of quarters with the economy near full employment and no sign of inflation take-off. He said above-trend growth is continuing and consumer spending looks particularly strong.

He is worried that trade risks will mar investment plans, especially in manufacturing, though limited so far.

The iShares 20+ Year Treasury Bond ETF (TLT) closed in the green for the 2nd-straight session while reaching a high of $119.57.

Fresh resistance at $119.50-$119.75 and the 200-day moving average held. Rising support is at $119-$118.50.

Market Analysis – The Russell 2000 ETF (IWM) has been in a tight range between $170-$172 over the past 5 sessions with stretch to the downside. Thursday’s high reached $171.54 shortly after the open with lower resistance at $171.50-$172 holding.

The late August peak reached $173.39 and would be back in play on a close above the latter.

Near-term support at $170.50-$170 was split on the backtest to $170.26 ahead of the closing bell.

A move below $169.75 would would be a slightly bearish signal with risk to $169-$168.50 and the 50-day moving average.

RSI has been flatlining with support at 50.

A move below this level could lead to a continued backtest towards 45-40 and the late July lows. Resistance is at 55-60.

The Real Estate Select Sector Spider (XLRE) extended its win streak to 4-straight sessions after testing a high of $33.96. Fresh resistance at $34-$34.25 held with a move above the latter being a continued bullish development.

The August 52-week peak reached $34.13.

Support is at $33.50 followed by $33.25 and the 50-day moving average.

RSI is trying to clear resistance at 60. Continued closes above this level would signal additional strength for a possible run to 65-70 and the mid-August peak.

Support is at 55-50 with a close below the latter being a warning sign for lower lows.

All the best,
Roger Scott