The Bottom Line
Technical, fundamental and seasonal influences point to another volatile period for equity markets around the world this week. Support was established by major equity indices on August 8th including 1,105.54 for the S&P 500 Index, 10.604.07 by the Dow Jones Industrial Average and 11,617.81 by the TSX Composite Index. Support is about to be tested due to a series of four negative annual recurring events. Preferred strategy is to wait for weakness to purchase sectors that benefit from favourable seasonal influences at this time of year (e.g. gold equities, agriculture, “gassy” equities) and to watch for entry points on weakness in other economically sensitive sector in October.
The S&P 500 Index fell 19.74 points (1.68%) last week. Intermediate trend is down. Support is at its low on August 8th at 1,101.54. Resistance is forming at 1,230.71. The Index trades below its 50 and 200 day moving averages. RSI and MACD have recovered from oversold to neutral levels. Stochastics have retreated from overbought to neutral levels. Downside risk is to its August 8th low.
The TSX Composite Index fell 214.87 points (1.70%) last week. Intermediate trend is down. The Index trades below its 50 and 200 day moving average. Support is at 11,617.81. Resistance may be forming near its 50 day moving average at 12,808.75 and 12,798.53. RSI and MACD have recovered from oversold levels. Stochastics already are overbought and showing early signs of rolling over. Strength relative to the S&P 500 Index remains positive.
The U.S. Dollar Index gained 2.43 last week. It broke above resistance at 76.72 on Friday. Intermediate trend changed from down to up. The Index broke also above its 200 day moving average on Friday. Short term momentum indicators are overbought, but have yet to show signs of peaking.
Crude oil added $0.34 per barrel last week. Intermediate trend is down. Short term momentum indicators are trending higher from oversold levels. Stochastics already are overbought. Resistance is likely near its 50 day moving average currently at $91.14.
Gold slipped $26.80 U.S. per ounce last week. Gold remains in a volatile trading range following a “blow off” three weeks ago. Short term momentum indicators have rolled over from overbought levels. Gold equities are outperforming gold. Seasonal influences are positive until the end of September, followed by weakness in October.
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