Recap: Week Ending August 29, 2014

August 29, 2014

Markets finished the week flat to up after in which what appears to be slowed week of the year. Volumes in the Dow Jones Industrial average were at levels that have not been seen since the 2013 winter holiday season. The presence of low volume led to extremely narrow trading ranges resulting in little action or conviction in either direction.  The small daily ranges come as the world appears to be entering yet another state of terror.  Friday British Prime Minister was quoted saying, “We could be facing a terrorist state on the shores of the Mediterranean and bordering a NATO member.” The news out of the UK was not met by a similar statement from the Whitehouse; however, one can only assume that President Obama has similar feelings and is watching the situation very closely. The news had a minor impact on equities which saw a small selloff on open. Gold, which is commonly known as a haven during times of global problems caught a small bid, however, was unable to maintain the upside activity.

The Toronto Stock Exchange Composite Index, TSX, performed relatively the same as its US counterparts, closing slightly in the green for the week. Like in the US, the TSX saw low trading volumes and a lack of movement in either direction. This comes as little economic data was released for the Canadian economy. The only economic news which had an impact on the TSX was Canadian GDP Quarter over Quarter that was released Friday. The figure came in strong at 3.1%, beating the consensus of 2.7% and the previous reading of 0.9%. The figure provided a bid to Canadian equities, pushing the TSX higher by about 0.5% on the day. The TSX continues to look strong as it made new multi-year highs this past week.

The largest economic news that affected US markets was the incredible beat in Durable Goods Orders which came in up 22.6% on Tuesday. Economists were expecting an increase of 7.5% over the prior reading of a gain of 2.7%. The huge beat was met by little market activity with all US majors not moving higher by much as one would expect on such a report. This lack of participation appeared to be the theme of the week as later Tuesday the US Consumer Confidence came out being expectations and the prior reading, however, little upside was seen. The figure came in at 92.4, well above the economist expectations of 89 and the prior reading of 90.3. With this being taken into consideration, the market did close fractionally higher Tuesday, after both the Dow Jones Industrial Average and the S&P 500 made new all-time highs. The NASDAQ was also able to hit a level that has not yet been seen since the year 2000.

Both traders and investors appear to be looking forward to September, which has historically been a fairly volatile month for the markets. Volatility is welcome after the VIX, which is known as the volatility index, is sitting within a day’s range of yearly lows. For the 2014 calendar year, the VIX has been trending lower as markets continue to grind higher on low activity trade. With this being said, the VIX did spike higher towards the end of July when geopolitical tensions were increased, however, has since sold off.

This upcoming week is a shortened trading week with Monday being closed for Labor Day in both Canada and the United States. The holiday means that trading activity next week will most likely be fairly quiet, similar to this past week.

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