U.S. markets opened in negative territory and suggested a pullback towards near-term support on downside momentum. The move comes following news over the weekend of underground bomb detonations and missile tests in North Korea. President Donald Trump responded by saying he is allowing Japan and South Korea to buy a substantially increased amount of highly sophisticated military equipment from the United States.

North Korea said the U.S. is a heinous aggressor and is begging for war. With the geopolitical rhetoric heating up, investors fled into Gold which hit its highest level of the year.

Global Economy –European markets were mostly lower following Monday’s pullback with Germany’s Merkel saying more sanctions are needed on North Korea. The FTSE 100 gave back 0.5%while France’s CAC 40 index declined 0.3%. The Stoxx Europe 600 slipped 0.1% and the Belgium20 dipped 0.02%. The DAX 30 gained 0.2%.

The Eurozone September Sentix investor confidence unexpectedly rose 0.5 to 28.2, stronger than expectations for a dip of 0.7 to 27.

Eurozone July PPI was unchanged month-over-month and up 2.0% year-over-year, weaker than expectations of 0.1% month-over-month and 2.1% year-over-year.

Eurozone July retail sales fell 0.3% month-over-month, matching expectations and the largest decline in 16 months.

Asian markets traded in a tight range, for the most part, following Monday’s weakness, while finishing mixed. Japan’s Nikkei was the biggest decliner after falling 0.6%.

South Korea’s Kospi declined 0.1% while Hong Kong’s Hang Seng Index was basically flat after adding a point. China’s Shanghai index was up 0.2% and Australia’s S&P/ASX 200 advanced 0.1%. 

U.S. Factory Orders dropped 3.3% in July, and slightly worse than expectations for a 3.2% monthly decline. Excluding transportation, orders rose 0.5% versus the upwardly revised prior 0.1% gain.

August TD Ameritrade IMX Level checked in at 7.45

August Gallup US ECI level came in with a reading of +6.

Market Sentiment- Fed Governor Lael Brainard said core global growth outlook is much improved compared with two years ago and risks to the economy from major trading partners have really shifted. She added 2017 global growth is contributing to the U.S. economy after having been a major downside risk. She went on to say the outlook has improved in Europe, Japan, Canada and China.

Minneapolis Fed president, Neel Kashkari said rate hikes may be doing real harm to the economy and premature rate hikes are not free in terms of inflation and job growth, as the Fed may be allowing inflation expectations to slip. He also sees a lot more slack in the labor market than the Fed appreciates.

The iShares 20+ Year Treasury Bond ETF (TLT) made a strong move past resistance at $127.50-$128 after trading to a high of $128.80. These levels will now try to hold as short-term support on a backtest. Continued closes above $128.75-$129 should lead to a short-term run towards $130-$132.

Market Analysis- The Spiders Dow Jones Industrial Average ETF (DIA) made a nice recovery for the second time following the late August backtest towards the 50-day moving average. The low tapped $216.62 a week ago with with current support at $217.50-$217 following today’s pullback.

A move, or close, below $216 would be a slightly bearish development. Resistance is at $219-$219.50 with a recovery above $220 keeping all-time highs in play.

The Financial Select Sector Spiders (XLF) is trying to recapture its 50-day moving average following last Friday’s move above this level and run to $24.91.

Lowered resistance is at $24.50-$24.75 following today’s 2% pullback. Current support is at $24.25-$24 with the low of $24.17 breaching the previous August intraday low of $24.35. A move below $23.75 would be a bearish development.

All the best,
Roger Scott