Trending Indicators
US Stock Market Confirmed Downtrend 
US Bond Market Confirmed Downtrend
Canadian Stock Market Confirmed Downtrend
US Bond Market Confirmed Downtrend
Canadian Stock Market Confirmed Downtrend
In the markets:
Markets were mixed worldwide last week. US indices were mostly higher, but the Dow Industrial were down -0.5% thanks to some high-profile earnings misses like Hewlett Packard. The Nasdaq led the US indices at +1.5%, with Small Caps not far behind. In Canada, strength in the Mining and Financial sectors combined to lift the TSX Composite by +0.2% for the week. Developed International markets slipped slightly, at -0.2%, but Emerging Markets at -1.7%
felt the brunt of widespread selling. Many emerging market currencies
have spiraled lower recently, and those countries’ markets have declined
in concert. Just this week, Indonesia plummeted -8.7%, Thailand sank
-7.5% and the Philippines fell by -5.6%.
The most exciting thing that happened economically in the US during the past week was that bond yields did not go even higher. Both the 10-year and 30-year yields eased at the end of the week to end slightly lower at 2.82% and 3.80% respectively, removing some of the jitters over the recent rapid increase in rates.
Disappointing new home sales (394,000 vs 487,000 expected) and a slight
rise in jobless claims helped take the pressure off of rates, allowing
them to pull back.
Canada’s dollar lost the most in more than two months
as wholesale and retail sales fell and consumer-price gains stayed
below the Canadian central bank’s inflation target for a 15th
consecutive month, fueling concern that Canada’s economy is slowing.
In Europe, more signs of recovery from recession were reported.
The Eurozone’s trade surplus widened in June, with exports up 3.0%, the
first gain in three months. UK retail sales excluding autos rose for a
third straight month, jumping 1.1% in July. The Markit Eurozone flash
Purchasing Managers Index (“PMI”) Composite Output Index signaled the
largest monthly increase in business activity in over two years in
August. The PMI rose for the fifth successive month, up from 50.5 in
July to 51.7, the highest since June 2011. The above-50 readings signal
two consecutive months of rising output, in contrast to declining
business levels over the prior 17 months.
China’s manufacturing economy stabilized in August
bringing a three-month period of decline to an end, according to the
Markit/HSBC flash PMI, which rose sharply from July’s near post-crisis
low of 47.7 to 50.1. This marked a return to the above-50
(expansionary) level for the first time since April.
(sources: Bloomberg.com, ft.com, guggenheimpartners.com, ritholtz.com, markit.com, financialpost.com)
Looking Ahead
August is typically the month that many traders go on vacation and the recent lower-than-normal volumes reflect that. The markets have been pulling back but in a controlled manor. The S&P 500 has declined 2.7% from the high it set on August 2nd; the NASDAQ is only down .6% from the high set on 8/13, the Dow Jones Industrial Average is down 4% from the high on 8/2.
August is typically the month that many traders go on vacation and the recent lower-than-normal volumes reflect that. The markets have been pulling back but in a controlled manor. The S&P 500 has declined 2.7% from the high it set on August 2nd; the NASDAQ is only down .6% from the high set on 8/13, the Dow Jones Industrial Average is down 4% from the high on 8/2.
The US stock market entered a confirmed downtrend last week.
Prior to last week, the equity exposure of the accounts (in general)
has been at levels higher than experienced anytime in the last two
years. With the confirmed down signal, the aggressive US growth strategy went to cash last week whereas the US Growth and Income strategy remained invested. In general, even with the higher equity exposure the accounts are still within the desired risk tolerance drawdown levels. As always, I will continue to closely monitor the accounts and the markets and take action accordingly.
