Optimism about US-China Trade talk and monthly long Hon Kong unrest drove the stock market higher. On the economy front, US created 130,000 jobs in August less than the expected 160,000 while US productivity rose more than expected in the second quarter. The mixed reports did little to affect the markets. For the week, S&P 500 index closed at 2978 up 1.79%, Dow Jones Industrial Average gained 1.49% and technology laden NASDAQ composite index increased 1.76%.
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| Weekly chart of S&P 500 index |
After four weeks trading between 2820-2940 range, S&P 500 index finally broke through the trading channel on the top side. The 2940 level has now turned from a resistance to a support. Usually after breaking out from the trading range, the index is expected to come back down to test its support in a short time. If the test fails, the breakout is consider a false breakout and it will be followed by a severe sell-off. If the test is successful, the bull is in control and the index will just keep trending higher. The market sentiment has been more positive than negative lately and the momentum indicator of S&P 500 index has turned back up so it is likely that the back test will be successful. However, no one can predict the future so we will see how the markets play out in the next couple weeks.
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