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.