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China’s Stock Bounce Translates to U.S. Gains, Boosted By Jobs Data

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September 2, 2015

Calm temporarily returned to Chinese markets, helped by a looming two-day market close for a holiday there and a report in the Chinese press of pledge by a group of Chinese brokerages to buy shares. That was good enough to lift U.S. sentiment in Wednesday’s early trading after Tuesday marked another day for bruising action. A solid—if far from exciting—private-sector jobs report helped stocks maintain early gains. Crude futures are lower, which could drag on energy shares.

Tuesday marked the third-biggest daily drop of the year for the S&P 500 (SPX), in figure 1, and the Dow Jones Industrial Average ($DJI), while for the NASDAQ Composite (COMP), it was the third worst based on percentage decline.

SPX-breaks-support

FIGURE 1: CHART CHURN?

The S&P 500 (SPX) neared a test of the closely watched 1900 line in Tuesday’s volatile session, breaking support at 1922. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Private-Sector Hiring. Hiring by U.S. private firms picked up in August with 190,000 net new jobs, payroll firm Automatic Data Processing said. The job growth was an improvement over July's 177,000, which was revised down from the initial report of 185,000. But the August figure was below analyst expectations of about 210,000 net new private-sector jobs. It’s likely to invite fresh caution heading into Friday’s broader August snapshot tabulated by the Labor Department. Currently, Wall Street looks for about 220,000 new jobs in the Friday report.

Oil’s Slippery Slope. Crude futures are down some 2% early Wednesday, presumably reacting to a higher-than-expected build in U.S. inventories. Weaker U.S. and Chinese manufacturing data also fueled a rout in prices that started in the previous session. London-traded Brent and U.S.-based WTI crude fell some 8% Tuesday to end a 25% three-session climb; that’s the largest three-day gain since 1990.

Sign of the Cross? The Russell 2000 (RUT), populated with small-cap stocks, has joined the major stock indexes in forming a chart “death cross” that some technicians track. Chart watchers believe a death cross—when the 50-day moving average (MA) crosses below the 200-day MA—indicates that a shorter-term decline has developed into a longer-term downtrend.  RUT’s  50-day moving average fell to 1,222.95 in midday trade Tuesday, crossing below the 200-day moving average (MA), which slipped to 1,224.11, according to market data firm FactSet. RUT’s last death cross appeared on Sept. 22, 2014. The index fell another 7% in the three weeks after that before bottoming at a one-year low, according to FactSet data.

Good trading,
JJ
@TDAJJKinahan

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