U.S. markets showed strength throughout Tuesday’s session as better-than-expected earnings and mostly positive economic news helped fuel the rally.
The gains propelled the S&P 500 and Nasdaq to fresh record closes as both indexes came within 5 points of setting all-time highs.
The Russell 2000 showed the most strength after zooming 1.6% and testing a session high of 1,587.
Prior and lower resistance at 1,585-1,600 was cleared and held with additional hurdles at 1,625-1,650 on continued closes above the latter.
The Nasdaq surged 1.3% after tapping a high of 8,128.
Fresh and lower resistance at 8,100-8,150 was cleared and held with fluff to 9,000-9,050 on a close above the latter.
The S&P 500 rallied 0.9% following the intraday push to 2,936.
Near-term and lower resistance at 2,940-2,950 held with breakout potential towards 2,975-3,000 on a close above the latter.
The Dow rose 0.6% after trading to a fresh 2019 high of 26,695.
Prior and lower resistance at 26,500-26,750 was cleared and held with a close above the latter getting 27,000 and all-time highs in play.
Healthcare led sector strength after jumping 1.6% while Communication Services rose 1.2%.
Consumer Staples and Energy were the only sector laggards after falling 0.3% and 0.1%, respectively.
Global Economy – European markets settled mostly higher despite news consumer confidence in the Eurozone fell in April.
UK’s FTSE 100 rallied 0.9% while the Stoxx 600 Europe and France’s CAC 40 added 0.2%. Germany’s DAX 30 nudged up 0.1%. The Belgium20 sank 1.2%.
The European Commission’s monthly consumer confidence indicator dropped by 0.7 points in the Eurozone and 0.6 points in the EU in April, after holding steady in March.
This dragged the overall Eurozone confidence figure to -7.9, and the EU’s to -7.7.
Asian markets settled mixed after reacting to the spike in oil prices.
Australia’s S&P/ASX 200 jumped 1% while South Korea’s Kospi and Japan’s Nikkei advanced 0.2%.
China’s Shanghai stumbled 0.5% and Hong Kong’s Hang Seng was down less than a point, or 0.02%.
Richmond Fed Manufacturing Index for April fell 7 points to 3 after falling 6 points to 10 in March. Expectations for a rise of 1 to 11. The employment component was at 18 from 23, with wages at 25 from 33.
New order volume was -2 from 9. Prices paid were 3.04% from 2.84%, with prices received at 1.84% from 2.07%. The 6-month shipment index rose to 49 from 40.
The future employment reading inched up to 15 from 13, with prices paid at 2.45% from 2.10%.
FHFA House Price Index rose 0.3% to 272.8 in February, missing forecasts for a rise of 0.4%, and follows January’s 0.6% increase to 272.1.
On a 12-month basis, the index posted a 4.9% year-over-year growth clip. Home prices increased in 7 of the 9 regions, led by New England with weakness in the Mid Atlantic and Mountain regions.
All regions registered 12-month gains.
New Home Sales rose 4.5% to 692,000 in March, beating estimates of 645,000, and follows February’s stronger than expected 5.9% increase to 662,000.
The rise in sales saw the months’ supply fall to 6 from 6.3. Regionally, sales were mixed with a 17.6% jump in the Midwest, a 6.7% rise in the West, and a 3.6% advance in the South.
The Northeast sank 22.2%. Prices were slightly disappointing with the median declining 4% to $302,700 after the prior 3.9% gain to $315,200 last month.
The 12-month pace also slid to -9.7% year-over-year, versus -3.7%.
Redbook Store Sales were up 6% for the year in the week ending April 20th.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) rebounded after trading to a high of $122.70.
Lower resistance at $122.50-$123 was cleared and held with a move above $124 being a more bullish signal.
Shaky support remains at $122.25-$121.75 and the 50-day moving average.
Market Analysis – The Spider S&P 500 ETF (SPY) broke out of a 6-session trading range after tapping an all-time intraday high of $293.14. Fresh and lower resistance at $293-$293.50 was cleared but held.
Continued closes above the latter keeps blue-sky territory open towards $295-$297.50 depending on momentum.
New support is at $291.50-$291. A move below $290 would indicate a possible near-term top.
RSI is showing renewed strength with fresh resistance at 75-80.
The latter represents January 2018 peaks and a level that would also signal overbought territory. Support is at 70.
The Materials Select Sector (XLB) showed strength after trading to an intraday high of $57.87. Near-term and lower resistance at $57.50-$58 was cleared and held.
Continued closes back above $58.50 would be a more bullish signal for a possible run towards $59.50-$60. The 52-week peak is at $61.21.
Current support is at $57.25-$56.75.
A close below $56.50 would be a slightly bearish signal with risk towards $56-$55.50 and the 50-day moving average.
RSI is trying to level out after holding support at 60. A close below this level would signal additional weakness towards 55-50. Resistance is at 65.
Continued closes above this level would be a bullish signal for additional strength towards 70-75.
Position Update
Cluster holding up.
Energies are no longer strengthening.
Expect more upside next few sessions.
Friday’s GDP is the big report for the week.
We are allocating the portfolio as follows:
Long 25% in XLI closed on Tuesday at 78.77
Long 25% in XLP closed on Tuesday at 56.75
Long 25% in XLU closed on Tuesday at 57.46
Short 25% in XLE closed on Tuesday at 68.57
Option Traders… the following regular MONTHLY options meet our criteria:
XLI – JUN 77 Strike Price CALL (Expires June 21, 2019)
XLP – JUN 56 Strike Price CALL (Expires June 21, 2019)
XLU – JUN 58 Strike Price CALL (Expires June 21, 2019)
XLE – JUN 67 Strike Price PUT (Expires June 21, 2019)
Roger Scott.