Trade Tensions Continue To Fester

Tuesday,September 4, 2018, 11:15 AM, EST

  • NASDAQ Composite -0.25% Dow -0.24% S&P 500 -0.14% Russell 2000 -0.19%
  • NASDAQ Advancers: 940 Decliners: 1293
  • Today's Volume +39%

A new trading month kicks off the week but a similar narrative dominates Wall Street this morning. Trade tensions continues to fester with Canada and the US failing to reach a NAFTA replacement pact by Friday's deadline. Adding fuel to the fire was President Trump's tweet over the weekend saying that there was no "political necessity" to keep Canada in a deal with Mexico. Also simmering under the surface was a report last week that the US was standing by to inflict additional levies on $200 billion worth of Chinese goods. While stocks are coming off their best August in 4 years, Ye Old Trader's Almanac points to September as being one of the weakest months of the year dating back to 1950. On average the Dow has fallen 0.7% in September while the S&P 500 has fallen 0.5%. Of course keeping everything in perspective both Nasdaq and the S&P 500 touched new all-time highs in August. Oil prices are rising this morning as Hurricane Gordon threatens production in the Gulf of Mexico. Gold is slipping as trade concerns hits foreign currencies and strengthens the dollar. From a sector perspective Utilities (+0.94) and Consumer Staples (+0.21) are the leading gainers while Materials (-0.69%) and Telecommunications (-1.03%) are struggling today.

  • Construction spending for the month of July climbed by just 0.1%. Data for June was revised up to show construction outlays declining 0.8% instead of the previously reported 1.1% drop. While construction spending rose in July, the overall trend has slowed due to rising material costs in addition to land and labor shortages.

  • The ISM Manufacturing Index jumped to 61.3, the highest level since May of 2004 as orders, production and employment all picked up, offering a positive sign for the economy. Of particular note the rise in the employment gauge suggests manufacturers may record another month of strong payroll gains in the labor department figures due out on Friday.

  • While this is a holiday shortened week, it is not without important events as the Senate deliberates on Supreme Court nominee Brett Kavanaugh and we get the employment report for August on Friday.

Technical Take : Don't be fooled by Gold

A global risk-off sentiment is widespread today leading to a bid in safe havens including the US dollar which in turn is weighing heavily on precious metals and miners. The gold miner ETF, ticker GDX, is down more than 3% in today's session which brings its YTD decline deeper in the red to (-22.5%). The downside acceleration for the GDX began the week ending August 8 th when it broke down below the clearly defined $17 support line and has since given up more than 15%. We noted back on March 1 st this was a major technical level which, if broken, carried a minimum measured move to $17. With that level now approximately 5% below last sale, there is still a little meat left on the bone for shorts assuming the $17 target is met. However that is a big assumption which may not be worth the risk. Newcomers with a high risk tolerance may better off taking a flyer on the long side with clearly established stops in place on where to exit before even entering. A move above the August low, $18.15, could be the makings of a "double bottom" pattern. Otherwise the $17 level appears next which represents the midpoint of the large "double bottom" cyclical low made in 2015-2016. With the weekly RSI already down at $22, hoping on the short bandwagon at this point could a fool's gold strategy

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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.

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