An object in motion stays in motion

An object in motion stays in motion.  A well known quote from Newton’s first law.  The lesser spoken part of that law states that the object stays in motion unless acted upon by an unbalanced force.  I am not sure if Newton was writing about equity markets, but that certainly appeared to be the case yesterday as markets paused on their epic journey to new highs.  Markets started the session still digesting the legal setbacks of President Trump’s former colleagues as the President himself predicted in a Fox interview that if he were impeached the market would crash making people poor.  Ok.  Not quite sure the market reacted to the pronouncement, but there were a few chuckles overheard on the trading floor.  What really dragged on markets yesterday was the on-again off-again trade negotiations with China.  Yesterday marked the start of another wave of tariffs causing the Chinese to promise counter attacks.  Oh, and the administration has also put a new list together for additional tariffs in the future.  Sounds familiar?  It should, but markets were unable to ignore the setbacks on a quiet news day and all of the major indices traded off.  The S&P500 made some earnest attempts toward the resistance line early in the session but ultimately traded down to close just off session lows.  Yesterday’s trading was by no means a sell off but rather more of a pause and the S&P remains in clear striking range of its all time high.  2863 is becoming a stronger resistance level and is the only potential impediment in site for the index (see chart 4 in my attached daily chartbook).  The Dow Jones Industrial Average bounced off its very important Fibonacci support line at 25588 closing above its lows of the session.  A failure to hold that support line would be negative for the index as it is critical in maintaining its recent positive trend and momentum (see chart 6 in my daily attached chartbook).  The Russell 2000 could not muster the momentum to push to another new high yesterday as it bounced right off of its all time high to close down on the day (see chart 7 in my attached daily chartbook).  The NASDAQ 100 continues to languish in the range between support at 7308 and its all time high of 7511 (see chart 8 in my attached daily chartbook).  All equity indices remain constructive.  The US Dollar rallied in yesterday’s session in response to the Fed FOMC minutes released on Wednesday.  The move also marks the Dollar Index’s bounce off of it’s Fibonacci support line at 95 (see chart 13 in my attached daily chartbook). Remember that higher yields and a tightening central bank increases demand for treasuries from abroad, which in turn increases demand for US dollars.  Gold futures, which have been trading in an inverse relationship to US Dollars mirrored the move down again. Gold’s only support below is its recent low and Fibonacci support line at 1162 (see chart 12 in my attached daily chartbook).  Ten year treasury yields continue to get strong support from the 2.8% Fibonacci line and they will start today’s session at 2.83% (see chart 20 in my attached daily chartbook). It must also be noted that the yield curve continues its flattening with the 2 year / 10 year swap sitting at 20 basis points.  We will have a lot more to discuss on this topic next week.

This past week was one marked by very little in the way of real stimulus for the market in either direction. Next week, the week before the Labor Day holiday, may prove to be a slow one as well but we will have some economic data to mull over.  Specifically, we will get some GDP figures along with a first look at the PCE (personal consumption expenditures), which is the Fed’s favorite gauge for inflation.  Today, Fed Chairman Jerome Powell will give a speech at the Jackson Hole conference which may offer some additional clues on the Fed’s view of the economy and the all-important (or at least highly quoted) r-star, which is economic speak for the interest rate that neither slows nor speeds up the economy.  Don’t you just love economics?  I do. Jay Powell’s speech might just be the only thing that can wake up these tired markets and set them back in motion.

Muriel Siebert & Co., Inc. is an affiliated broker/dealer of the public holding company, Siebert Financial Corporation, which also owns Siebert AdvisorNXT, Inc. Siebert AdvisorNXT, Inc. is a registered investments advisor (RIA) with the SEC and with state securities regulators. We may only transact business or render personal investment advice in states where we are registered, filed notice or otherwise excluded or exempted from registration requirements. Investment Advisor products are NOT insured by the FDIC, SIPC any federal government agency or Siebert’s parent company or affiliates.

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