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U.S. markets were sluggish throughout the first half of action on Wednesday as the major indexes traded on both sides of the ledger and in tight ranges. News that President Trump said Americans can look forward to another round of stimulus checks before the end of the year was offset by the continuing rise in coronavirus cases.
U.S./ China relations were also in the spotlight after a report circulated that President Trump’s advisers put forth a plan to destabilize Hong Kong’s currency peg in order to retaliate against China following the passage of the security law in Hong Kong. Despite the worries, the market showed some momentum throughout the 2nd half of trading to finish higher for the session.
The Nasdaq was up for the 6th time in 7 sessions after rising 1.4% with the afternoon peak reaching 10,494. Current and lower resistance at 10,400-10,500 was cleared and held with a close above the latter and the all-time high at 10,518 signaling additional momentum towards 10,600-10,700.
The S&P 500 rebounded after gaining 0.8% with the intraday high reaching 3,171. Lower resistance at 3,175-3,200 was challenged but held with a move above the latter getting 3,225-3,250 back in play.
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The Dow was up for the 3rd time in 4 sessions after adding 0.7% with the morning high tagging 26,109. Near-term and lower resistance at 26,000-26,250 was cleared and held with a move above the latter and the 200-day moving average suggesting a retest towards 26,500-26,750.
The Russell 2000 climbed 0.8% with the opening high reaching 1,431. Lower resistance at 1,420-1,435 was cleared and held with a close above the latter signaling additional another run towards 1,450-1,465 and the 200-day moving average.
Technology led sector strength after advancing 1.6% while Consumer Discretionary and Financials jumping 1.1%, respectively. Materials were the weakest sector after sinking 1.4% while Consumer Staples were down 0.3%.
European markets closed lower despite finance minister Rishi Sunak promising an additional 30 billion pounds ($38 billion) in stimulus. This would include bonuses to get furloughed workers back and a cut in value added tax for the hospitality sector.
The Belgium20 dropped 1.3% and France’s CAC 40 fell 1.2%. Germany’s DAX 30 lost 1% and the Stoxx 600 was lower by 0.7%. UK’s FTSE 100 was down 0.6%.
Asian markets settled mixed as rising global coronavirus infections and an increasingly cautious outlook over U.S. growth weighed on sentiment.
China’s Shanghai surged 1.7% to extend its winning streak to 7-straight while Hong Kong’s Hang Seng was up 0.6%. Australia’s S&P/ASX 200 sank 1.5% and Japan’s Nikkei fell 0.8%. South Korea’s Kospi slipped 0.2%.
MBA Mortgage Applications rebounded 2.2% following a decline of -1.8%, previously. Strength in the latest report was in the purchase index which climbed 5.3% after sliding -1.3% previously. Refinancings edged up 0.4% following a -2.2% decline. The gains have seen 12-month rates accelerate with the applications index posting a 71.1% year-over-year clip, versus 45.4%. Refis have popped to a 110.9% year-over-year clip compared to 74.4% previously, while the purchase index rose to 33.2%, double the prior 15.2% rate. Mortgage rates fell further with the 30-year declining to 3.26%, a new record low. The 5-year ARM fell to 2.98%
Consumer Credit fell -$18.3 billion in May to $4,113 billion after dropping a historic -$70.2 billion in April. Consumer credit hasn’t posted 3-straight monthly declines since 2010. Nonrevolving credit bounced 6 billion after sliding -$12 billion previously. The slump in nonrevolving credit was the first decline since August 2011. Revolving credit tumbled another -$24.3 billion, a 4th-straight drop, after April’s record -$58.2 billion plunge.
New York Fed Daleep Singh said the Fed may slow the pace of corporate bond purchases if the financial markets continue to improve. He noted the functioning of corporate credit markets had strengthened since the Fed unrolled its emergency lending backstops.
Singh added the central bank stood ready to tweak its approach given the uncertainty around a potential wave of bankruptcies from the economic impact of the coronavirus.
The iShares 20+ Year Treasury Bond ETF (TLT) zigzagged for the 5th-straight session following the intraday pullback to $163.83. Near-term and upper support at $164-$163.50 was breached but held. A close below the latter would signal a further backtest towards $163-$162.50 and the 50-day moving average.
Lowered resistance at $165-$165.50.
The S&P 500 Volatility Index ($VIX) fell for the first time in 3 sessions despite testing a morning high of 30.20. Fresh resistance at 30-30.50 was cleared but held. A close above the latter would suggest additional upside towards 31-31.50 and the 50-day moving average.
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Upper support at 27.50-27 was also breached but held following the intraday fade to 27.24 with more important recovery levels at 25-24.50 and the 200-day moving average.
The Wilshire 5000 Composite Index ($WLSH) was up for the 6th time in 7 sessions with the intraday high tapping 32,376. Lower resistance at 32,250-32,500 was cleared and held. A close above the latter would be a slightly bullish signal for a retest towards 32,750-33,000.
Current support is at 32,000-31,750. A golden cross is in the process of forming with the 50-day moving average on track to clear the 200-day moving average. This is usually a bullish technical signal for higher highs.
RSI is back in a slight uptrend with key resistance at 60 and a level that has been holding since mid-June. A close above 60 would suggest additional strength towards 65-70. Support is at 55-50.
The Spider S&P Retail ETF (XRT) also ended higher for the 6th time in 7 sessions after closing on its peak of $44.32. Near-term and lower resistance at $44-$44.50 was recovered. A close above the latter would be a bullish signal for a retest towards $45-$45.50. A golden cross is also in the process of forming.
Current support is at $43.50-$43. A close below the latter would be a slightly bearish development with additional downside risk towards $42.50-$42.
RSI is trying to curl higher after holding key support at 60. A move below this level would signal additional weakness towards 55-50. Resistance is at 65-70.
All the best,