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Market Intelligence

August Draws To A Close As Investors Focus On Holiday Weekend

Friday, August 31, 2018,10:08 AM, EST

  • NASDAQ Composite +0.31% Dow +0.08% S&P 500 +0.12% Russell 2000 +0.16%
  • NASDAQ Advancers: 1206 Decliners: 886
  • Today’s Volume (First Hour) -14.2%

August draws to a close with the markets quietly opening mixed to higher with investors focused on the approaching holiday weekend. However trade matters are on the table again. The Trump administration is questioning the trade deal with Europe, there is word that tariffs on $200 billion of Chinese imports will go into effect in early September, and a deal with Canada doesn’t appear ready for prime time. On that European markets are lower across the board as were most Asian markets, and in the US the sectors are mixed with REITs (+0.5%) in the lead while Energy (-0.5%) rounds out the bottom. Treasuries are stronger as is the dollar index (+0.2%), Gold (+0.3%) is also higher but crude oil is off 0.2%.

  • Chicago Purchasing Managers Index declined to 63.6 in August, down from 65.5 in July but still better than expected. The data shows the prices paid and employment components increased but at a slower pace than in recent months, and new orders and production rose at a faster pace than recent months. Taken together the data reflects a growing economy with tame inflationary pressures.
  • Keep an eye on emerging markets and the spreading currency crisis. Argentina’s currency has lost over half its value this year including a 20% drop just this week, leading their central bank to hike interest rates to a whopping 60%. The Turkish lira is off 44%, the Brazilian real down 20%, the Russian ruble sinks 15.6%, the South African rand off nearly 16% and looks to set its worst August ever, the Indonesian rupiah hit its lowest in twenty years and the Indian rupee is at a three year low against the dollar.
  • The holiday shortened week ahead brings an active economic calendar. First thing Tuesday investors get a look at ISM Manufacturing, then Thursday comes ADP Employment, ISM Non-manufacturing, Factory Orders and Durable Goods, then Friday brings the all-important Nonfarm payrolls with expectations that 189k new positions were created.

Technical Take:

Today is the last trading session of August which has been a stellar month for US equities. The Nasdaq 100 and Composite indices have gained 6% and 5.7% MTD, followed by +4% for the small cap Russell 2000, while the large cap S&P 500 and Dow Industrials have posted a very respectable 3% and 2.2%. Unfortunately the same cannot be said for the rest of the world which is going through a period of risk-aversion. Some of the worst performing global indices for the month of August include Italy (-8.6%), Russia (-7.9%), China (-5.3%), Spain (-4.7%), the UK (-3.5%), and Germany (-3.3%).

Slowing global growth and unresolved trade pacts are driving flows to the United States which is further increasing dollar appreciation and bidding up safe haven treasuries. Demand for safe havens can be seen in the chart of the iShares 20+ Year Treasury Bond ETF, ticker TLT, which has been range bound throughout most of 2018 between $117 support and $123 resistance. The TLT has been very “technical” whereby a clear “double bottom” pattern was formed in Q1’17 at the $117 support, followed then by a symmetrical “head & shoulders” topping pattern in 2H’17.

The current setup shows a “double bottom”, or if you prefer an asymmetrical “inverse head & shoulder” pattern, each with a neckline at the $123. Momentum is favorable with the weekly RSI on the verge of breaking out to fresh YTD highs. With September being a seasonally weak period for equities, shorter term speculators should be mindful of a potential breakout in treasury bonds which likely would not bode well for equities which are melting up in similar fashion to January.

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Nasdaq's Market Intelligence Desk (MID) Team includes:

Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).

Michael Sokoll, CFA is Associate Vice President on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.