U.S. markets traded mostly to the upside throughout Monday’s session with the blue-chips lagging for the 4th-straight session as trade talks between the Trump administration and China began in Beijing.

The Russell 2000 rallied 0.8% following the late day surge to 1,519 into the close.

Upper resistance at 1,510-1,520 held with continued closes above 1,525 being a more bullish development.

The Nasdaq added 0.1% after testing an opening high of 7,343. Prior and lower resistance from last week at 7,350-7,400 held with a close above the latter signaling additional strength towards 7,450 and

the 200-day moving average.

The S&P 500 was also up 0.1% after tapping a high of 2,718 shortly after the opening bell.

Lower resistance at 2,725 easily held with a more important hurdle to clear at 2,750 and the 200-day moving average.

The Dow was down 0.2% following the intraday backtest to 25,009.

Upper support at 25,000-24,800 and the 200-day moving average held for the 3rd-straight session with a close below the latter being a slight bearish signal.

Industrial and Energy were sector leaders after after gaining 0.5%. Consumer Staples, Financials and Real Estate advanced 0.3%.

Communication Services paced sector laggards after giving back 1%.

Healthcare declined 0.1% while Technology and Utilities slipped 0.04% to round out the losers.

Global Economy – European markets ended higher as another round of Brexit talks between the U.K. and Brussels began again on Monday.

However, the chances of a disorderly exit from the EU continue to mount, with only seven weeks left until the U.K. is set to leave.

France’s CAC 40 surged 1.1% and Germany’s DAX 30 jumped 1%.

The Stoxx 600 Europe advanced 0.9% and UK’s FTSE 100 was higher by 0.8%. The Belgium20 gained 0.7%.

U.K.’s gross domestic product (GDP) was 1.4% higher in 2018 than in 2017, the weakest expansion since 2012. GDP rose at an annualized pace of 0.7% in the three months through December, down from 2.5% in the third quarter.

Asian markets settled mostly higher with markets in China and Taiwan, reopening after a weeklong Lunar New Year break. Japan’s Nikkei was closed for a holiday.

China’s Shanghai surged 1.4% and Hong Kong’s Hang Seng rose 0.6%.
South Korea’s Kospi added 0.2% while Australia’s S&P/ASX 200 slipped 0.2%.

There was no major economic news.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) fell for the first time in 5 sessions following the pullback to $121.77.

Fresh and upper support at $121.50-$121 held with backup help at $120-$119.50 and the 50-day moving average that remains in a strong uptrend.

Lowered resistance is at $122-$122.50.

Market Analysis – The Invesco QQQ Trust (QQQ) was up for the 2nd-straight session following the intraday push to $169.58. Near-term resistance is at $169.50-$170 held.

The QQQ’s have been in a mini trading range for 8 sessions and a close above $171 and the 200-day moving average would be a bullish development for higher highs.

Support is at $167.50-$167.

A move below the latter signaling a possible retest towards $166-$165.

RSI is flatlining with resistance at 60.

A close above this level would signal additional strength towards 65-70 with the latter representing late August resistance.

Support is at 55-50 with the latter holding since mid-January.

The Real Estate Select Sector Spider (XLRE) closed higher for the 3rd-straight session and for the 5th time in 6 after making a run to $34.72.

Fresh and lower resistance at $34.75-$35 held on the new 52-week peak and all-time high. A close above the latter would be a bullish signal for higher highs.

Rising support is at $34.50-$34.25 with a move below $34 signaling additional weakness and a possible near-term top.

RSI is signaling overbought levels with resistance at 75.

A move above this level would signal additional strength towards 80 with the latter representing the November 2017 peaks.

Support is at 70 with a close below this level signaling additional weakness.

We are holding the following positions:

1. AME
2. AVX
3. CMO
4. GFF
5. SNH
6. ZNGA

 

Options Traders – the following regular MONTHLY options meet our criteria:

AME – 21JUN Expiration $75 Strike Price Call

AVX – 21JUN Expiration $17.5 Strike Price Call

CMO – 17MAY Expiration $7.5 Strike Price Call

GFF – 19JUL Expiration $17.5 Strike Price Call

SNH – 21JUN Expiration $15 Strike Price Call

ZNGA – 21JUN Expiration $5 Strike Price Call

 

All the best,
Roger Scott.