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Final Friday frolic. Stocks traded mixed in volatile trading with little in the way of credible stimulus on the last trading day of the quarter. News of Elon Musk being sued by the SEC and Facebook’s latest security breach certainly roiled markets but did not ultimately have a large effect on them. The S&P500 slipped slightly as it attempts to build a consolidation base just below all time highs. The index will find support at the round 2900, 2864, and ultimately its 2846 Fibonacci line (see chart 4 in my attached daily chartbook). The Dow Jones Industrials flip-flopped throughout Friday’s session ultimately closing up slightly on the day. The Dow is building a base within its large trading range which extends between 26000 and its 26769 all time high. (see chart 6 in my attached daily chartbook). Though it has been push and pull by the ins and outs of the trade troubles, the Dow managed to grow around 6% for the quarter, helped by earnings and late quarter surge a few weeks back. The Russell 2000, which is in danger of de-trending, managed a positive close on Friday but was unable to close above 1700. With waning momentum in a downward trend, the small caps will need to gain some positive ground in order to remain constructive (see chart 7 in my attached daily chartbook). The NASDAQ 100 was able to gain some ground on Friday despite the crippling news from some of its larger constituents. The NASDAQ remains constructive within striking range of its all time high of 7691. Crude oil continued to surge with a big gain on Friday. Oil has been trading up in anticipation of supply cuts resulting from sanctions on Iran. Despite Presidential jawboning the US’ OPEC allies are not indicating that they will increase production to fill the supply outage. West Texas Intermediate Crude is hovering just below 4 year highs, which can impact inflation in future releases if the price strength persists. 10 year treasuries slipped late in Friday’s session pushing yields up slightly, perhaps preparing for a run back to their 3.12% highs. 10 year yields will start this week at 3.078% up slightly since Friday in response to news of trade talk gains.
The week ahead offers a broad array of economic releases which include manufacturing data, mortgage applications, durable goods orders, and lots of employment data (see attached weekly economic release calendar). Today, we get manufacturing PMI, which is expected to come in at 55.6 and ISM manufacturing which is forecast to come in at 60, down slightly from last month’s 61.3. Despite all of the releases of the week, all eyes will be on Friday’s monthly employment situation and the numbers leading up to it. Employment and wages are one the largest drivers of economic activity and ultimately inflation, which is why this release is one of the most highly anticipated. In the week ahead we will hear from Paychex, PepsiCo Lennar, and Cosco, amongst others (see attached weekly earnings release). Earnings season for the third quarter will kick off in earnest with the financials on October 12th and we can surely expect tension begin to grow along with anticipation. Today’s trade will be dominated by news of a trade pact reached with Canada, which should be positive for stocks, the US dollar, and bond yields and we can expect another week of volatility as we start the final quarter of 2018, which will likely be one more for the record books.
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