Recap: Week Ending August 8, 2014
US markets were able to close the week higher after volatility made its return. The move higher this week follows one of the worst weeks US equities have seen in months. Even though markets traded mostly horizontal for the week, Friday saw a large push higher on behalf of aggressive buyers to erase all losses made for the week. Simple daily moving averages, MA, proved to provide key areas of support this week with the Dow Jones Industrial Average, DJIA, and NADSAQ 100, NDX, finding the buyers at these levels. The Dow, which has been the weakest as of late when compared to other majors, found support at its 200 day moving average Thursday, while the NDX bottomed out on Thursday as well at its 50 day moving average. The fact that the Dow fell to its 200 day moving average where the NASDAQ is only at its 50 day proves that the Dow is indeed hindering the push higher for US stocks. The S&P 500, however, did not find support at its 50 day, and is now trading roughly 1.2% below it. The 500 is currently 3.6% above its 200 day MA.
This past week was a shortened week for trading in Canada with the Toronto Stock Exchange Index, TSX, being closed Monday for Civic Holiday Weekend. The shortened week led to a lack of volatility in either direction for the Canadian based index. Unlike its American counterparts, the TSX was unable to close the week higher after falling on trade Tuesday. The market traded in a tight horizontal pattern for the week off as the index found support at its 50 day MA. Currently the Relative Strength Index, RSI, is reading a 48 on the daily timeframe. A 48 reading indicates that the index is neither overbought nor oversold with such values being 70 and 30 respectively.
This was a busy week on the Canadian economic calendar with the release of monthly labor report for the month of July. The unemployment rate fell from 7.1% in the month of June to 7% in July. The move surprised economists who were expecting the figure to come in unchanged at 7.1%. On the other hand, net unemployment change did not meet expectations with the creation of only 200 jobs for the month of June. Economists were expecting roughly 20,000 jobs to be created for the month, an improvement from a loss of 9,400 jobs in June. The labor force participation rate also fell in July from 66.1% to 65.9%. A fall in the participation rate signals that many are have given up on searching for new employment after being out of the work. These figure are not all to settling for Canadians as it appears the economy is still studder stepping out of the recovery. Despite the TSX being near multi year highs, the Canadian economy is lagging behind the US which has an unemployment rate of 6.2%. Unlike the US where a directional move in unemployment has been seen, the Canadian labor market continues to move sideways. The move comes as credit rating agencies threaten to downgrade Ontario credit which would drive up the borrowing costs for the provincial government.