[Chart courtesy of MarketWatch.com]

1. Moving the markets

When all else fails, a few well-chosen words seem to be enough these days to put a sagging market back into bullish mode. Such was the case today, when China indicated that they were in no rush to respond to the latest round of tariffs announced by Washington.

In the process, this week’s rebound has sharply reduced the month-to-date losses for the major indexes. In the case of the S&P 500, the index is now only down -1.85%, while at its worst point, on August 14^th, we saw a loss of -4.66%. With tomorrow being the last trading day of the month, we could see another move higher, should positive trade jawboning continue.

However, today’s jump caused an opening gap in the S&P 500 chart (red circle), which eventually must be closed, meaning that the index will retreat to cover that gap. It always happens, it’s just a question of when.

At the same time, the S&P 500 is closing in on the upper range of its current trading band, as I posted yesterday. The above chart shows that level (blue line) at around the 2,945. If pierced, we may very well see an assault of the July highs.

If recent history is an indication, we could bounce off that “glass ceiling” and head back down to the support line, which lies at the 2,820 level. If that is shattered to the downside, a break of the 200-day M/A (red) will come into play, which might have dire consequences in that it would not only bring the June lows into play but also end this current bullish cycle.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Despite an early sell-off, caused by the bond market flashing a recession signal, the major indexes managed to climb out of that hole supported by a lift from the energy sector, as oil prices showed new signs of life. Even with that good effort, we remain stuck in a trading range with the ceiling of the S&P 500 being in the 2,945 area, while the bottom lurks around 2,820.

That’s a huge range, in which we’ve been seesawing since early August. A push through the ceiling may bring all-time highs back into play, while a break below the bottom may cause the index to revisit its June lows of 2,728. The Dow as well is rangebound between its 100-day and 200-day M/As.

Better-than-expected earnings from Hewlett Packard and Tiffany helped to fuel the fire and kept the bullish rebound going. The only fly in the ointment was low volume, which is typical for the week ahead of Labor Day.

The big news came from the bond market with the 30-year Treasury Bond now yielding less than what the S&P 500 pays in dividends. ZH charted it like this. This is so unusual and has only occurred for about 3 months in the past 40 years.

It confirms that markets continue to be distorted beyond recognition.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

An early follow through rally hit the skids and reversed with the major indexes ending up closing in the red.

It seems that yesterday’s attempt by the White House to try to revive the trade carrot ran out of steam, when China’s Global Times editor signaled that there appears to be no great desire (on their part) to move towards a trade deal any time soon:

“China on Tuesday issued 20 directives to boost consumption, in an effort to further tap domestic market, not putting so much emphasis on trade talks. China’s economy is increasingly driven internally, it’s more and more difficult for the US to press China to make concessions.”

That was enough to take the starch out of  equites with the Dow leading the race towards negative territory. It was a seesaw session that is sure to continue, as any potential trade talks are bound to include more saber rattling and will be tumultuous at best.

In economic news, we learned that US home price growth slowed to the weakest in 7 years with the meager MoM rise of 0.04% missing expectations of an 0.1% rise. This now the 15^th straight month of YoY declines in price, despite plunging mortgage rates.

It looks like the markets are stuck and are erratically reacting on the latest headline news, which seem to do nothing but support the current roller coaster. A breakout is sure to come sooner or later with the question being “will it be to new highs, or will we head towards bear market territory.”

Stay tuned.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

I was watching the futures markets last night as the major indexes were getting hammered on a follow through move from Friday’s sell-off. Even early this morning, the Dow had plunged 200 points when Trump suddenly announced that “China called our trade people last night and said let’s get back to the table.” He then told reporters that China called his team not once but twice in a bid to restart trade talks.

While that sounded good on the surface, the only problem was that none of this happened, according to China. Whatever the case may be, the objective was accomplished in that the markets reversed and soared, as the computer algos did not care about remarks by the Global China Times editor that Trump indeed “hallucinated” the 2 phone calls…

No, I am not making this up, and it is not April Fool’s Day either, this is nothing more than a sign of the insanity that drives the markets nowadays. ZH actually went through the trouble of charting some of this early morning idiocy.

In the end, the intra-day meandering ended during the last hour of trading when the indexes shot up and closed in the green thereby delaying a potential ‘Sell’ signal for our Domestic Trend Tracking Index (TTI).