U.S. markets rebounded on Wednesday with the Dow and S&P holding their 50-day moving averages following Tuesday’s dip below these levels. The Nasdaq had an inside day after failing lowered resistance and the Russell 2000 recovered the 1,400 level while holding its 100-day moving average.

Most sectors showed strength while finishing in the green with Energy leading the way higher. Utilities lagged and was the only sector that closed lower.

Global Economy – European markets traded mostly higher despite disappointing economic data out of Germany. The DAX 30 jumped 0.8% while France’s CAC 40 index advanced 0.3%. The Belgium20 added 0.2% and the Stoxx Europe 600 climbed 0.1%. The FTSE 100 fell 0.3%.

Germany’s total manufacturing orders fell 0.7% in July compared with a forecast for a slight increase of 0.4%.

Asian markets settled mostly lower with Japan’s Nikkei falling 0.1% to a 4-month low. Hong Kong’s Hang Seng Index gave back 0.5% and South Korea’s Kospi declined 0.3%. Australia’s S&P/ASX 200 dropped 0.3% while China’s Shanghai index was up 0.1%.

Australia’s gross domestic product grew by 0.8% in the second quarter from the first quarter, and 1.8% from a year earlier. Economists had expected 0.9% growth for the quarter and a 1.9% gain on a year-over-year basis.

August U.S. ISM nonmanufacturing index gained 1.4 points to 55.3 in August versus expectations for a bounce to 55.8.

U.S. Markit final August services PMI rose 1.3 points to 56. The employment component rose to 54.6 versus July’s 54.4.

August PMI Services Index Level checked in at 56.0 versus forecasts of 56.9.

The deficit edged up to $43.7 billion in July, from $43.5 billion in June, versus expectations for a $44.8 billion gap.

U.S. chain store sales rose 0.6% in the week ended September 2nd.

The MBA mortgage market index rose 3.3%, in addition to a 1.4% bounce in the purchase index and a 5.1% jump in the refinancing index for the week ending September 1st.

Market Sentiment – Dallas Fed President Kaplan said the Fed should be patient on raising interest rates for a third time this year as inflation has been slow to respond to a labor market that’s nearing full employment.

Meanwhile, Stanley Fischer submitted his resignation as Vice Chairman and as a member of the Board of Governors of the Federal Reserve System, effective sometime around mid-October. He cited personal reasons for his decision with his term as vice chair set to expire next June.

The iShares 20+ Year Treasury Bond ETF (TLT) tested a high of $129 intraday with near-term resistance at $128.50-$129 holding. Continued closes above the latter should lead to a short-term run towards $130-$132. Rising support is at $127.50-$127.

 

Market Analysis- The PowerShares QQQ (QQQ) are trying to build a base of support above the $144 level with today’s low reaching $144.08 intraday. A move below $144 opens up risk to $143-$142 and the 50-day moving average.

The rebound to $145.46 afterwards and close above $145 keeps $146-$146.50 and fresh all-time highs in play.

 

The Spider Gold Shares (GLD) pulled back off Tuesday’s 2017 high of $127.78 with near-term resistance at $128-$128.50 holding. The 52-week high is at $128.86.

A run towards $130-$132 could be in the cards on continued closes above $128.75-$129. Rising support is at $126-$125.50.

 

All the best,
Roger Scott