Market Brief – Friday 8/30/19

The broad equity indices “gapped” over resistance as the computer algorithm gave bullish investors the boost they were looking for. Sellers were dominant in early trading, which provides validation for the strong level of overhead resistance. Treasury yields also started the day slightly higher but have been unable to gain any traction as buyers stepped in during early trading.

Personal Spending increased +0.6% in July, yet Personal Income increased a mere +0.1% in July, validating that the recent spending spree has been entirely fueled by debt. On an annualized basis, Personal Consumption Expenditures increased to +4.1% while Personal Income slowed to +4.6%. Core PCE, the Fed’s preferred inflation gauge, came in at +1.58%, well below the Fed’s +2.0% target.

The Chicago Fed PMI rose in August which followed several other regional PMIs higher. While the factory sector gets a bit of a boost, consumers are less optimistic. The University of Michigan’s final sentiment index fell to 89.8 in August, with consumers citing tariffs as their top concern.

Stocks couldn’t hold their overnight ramp as the major equity indices all failed at a heavy zone of overhead resistance. The market remains bullish, so expect investors to give another go early next week at breaking resistance. The broad equity indices traded flat on the day.

Treasury yields started the day higher, headed lower, then back higher, only to close the day out lower. Treasury Bulls have not allowed 30-year Treasury bonds to cross back over 2%, which suggests that yields may not go much higher before heading lower. This is the first week 30-year Treasury yields have ever closed under 2%. Large commercial banks continue to support the bond market by buying $13 billion of Treasuries and Mortgage-Backed Securities last week.

Crude oil, along with oil and gas producing stocks, quickly gave back some of their gains from the last couple of days. Physical gold looks very toppy as speculators are holding a record long position and gold’s price isn’t rising. When speculators are over positioned, a rapid sell-off usually follows.