U.S. markets showed strength throughout Monday’s action despite disappointing economic news and continued chatter over China tariffs.

Commerce Secretary, Wilbur Ross, said President Trump would be perfectly happy imposing tariffs on the remaining $300 billion of Chinese imports if they fail to agree a deal.

Additionally, Ross also said that Trump is giving very serious thought to slapping tariffs on all auto imports, including those from the European Union.

Volatility stayed slightly elevated given the fresh comments and ahead of the Fed’s decision on interest rates midweek.

The Russell 2000 rose 0.6% following the intraday push to 1,538.

Lower and prior resistance at 1,525-1,540 was reclaimed with a move above the latter getting 1,545-1,560 and the 200/50-day moving averages in focus.

The Nasdaq was also up 0.6% after reaching a 2nd half high of 7,865. Near-term and lower resistance at 7,850-7,900 and the 50-day moving average was cleared but held.

The S&P 500 nudged up 0.1% while trading to a high of 2,897 shortly after the open.

Lower resistance at 2,900-2,925 held for the 6th-straight session with a close above the latter being a more bullish signal.

The Dow also gained 0.1% following the intraday push to 26,165.

Near-term and lower resistance at 26,250-26,500 also held for the 6th-straight session along with the 26,000 level and the 50-day moving average.

Communication Services and Real Estate led sector strength after rallying 1% while Energy rose 0.9%.

Materials and Financials were the weakest sectors after giving back 1%.

Global Economy – European markets were mixed ahead of the Bank of England’s decision on interest rates along with the ECB’s annual conference this week.

The Belgium20 fell 0.4% while Germany’s DAX 30 and the Stoxx 600 dipped 0.1%. France’s CAC 40 rose 0.4% and UK’s FTSE 100 climbed 0.2%.

Asian markets were also mixed amid ongoing political protests in Hong Kong and demands that the city’s top official, Carrie Lam, resign.

She announced over the weekend that a contentious proposal to allow extraditions to mainland China has been suspended, but not withdrawn.

Australia’s S&P/ASX 200 was down 0.4% and South Korea’s Kospi was off 0.2%.

Hong Kong’s Hang Seng added 0.4% and China’s Shanghai rose 0.2%. Japan’s Nikkei was up 7 points, or 0.03%.

Empire State Manufacturing Survey plunged 26.4 points to -8.6 in June, after rising 7.7 points in May to 17.8, and well below forecasts for a reading of 10.

The employment component dropped to -3.5 from 4.7 previously, and represented the first negative print since January 2017.

The workweek fell to -2.2 from 4.4. The new orders index slid to -12 from 9.7. Prices paid edged up to 27.8 from 26.2, with prices received came in at 6.8 versus 12.4.

The 6-month outlook gauge was fell to 25.7 versus 30.6, with the employment component at 15.6 from 16.3.

The future new orders index was 27.8 from 33.4, with prices paid rising to 36.8 from 33.1, prices received at 12.8 from 17.2, and capex at 10.5 from 26.2.

NAHB Housing Market Index slipped 2 points to 64 in June, after rising 3 points to 66 in May, while missing forecasts for a print of 67.

The single family sales index dipped to 71 from 72. The future sales index fell to 70 from 72 while the index of prospective buyer traffic was fell to 48 from 49.

Homebuilders were concerned over rising costs for development and construction, along with labor shortages, which offset the positive impact from lower mortgage rates.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) extended its winning streak to 5-straight sessions following the intraday run to $131.76.

Lower resistance at $131.50-$132 was cleared and held.

A close above the latter and the recent 52-week at $132.58 get $133.50-$134 in focus.

Support remains at $131-$130.50.

Market Analysis – The S&P 400 Mid Cap Index ($MID) has been in a 6-session trading range with Monday’s high reaching 1,908. Near-term and lower resistance at 1,900-1,925 was cleared and held with a close above the latter and the 50-day moving average being a more bullish signal for higher highs.

Near-term support is at 1,875-1,850 and the 200-day moving average.

A close below the 1,850 level would be a bearish development with risk towards 1,825-1,800 and late May lows.

RSI has been flatlining with resistance at 55.

A move above this level would signal additional strength with upside potential towards 60-65 and the latter representing the April high.

Support is at 50-45 with a move below the latter signaling additional weakness.

The Technology Select Sector Spiders (XLK) was up for the 7th time in 10 sessions after reaching an intraday peak of $76.54.

Near-term and lower resistance at $76.50-$77 was cleared but held. Continued closes above mid-April resistance at $78 would be a more bullish signal for continued strength.

Current support is at $76-$75.50 and the 50-day moving average.

A close below the latter would be a renewed bearish development with further risk towards $74-$73.50.

RSI has leveled out with support at 55-50.

A move back below the latter would signal additional weakness 45-40.

Resistance is at 60 and the monthly peak with a move above this level signaling additional strength towards 65-70 and the latter representing late May support.

We are holding the following positions:

1. COWN 
6. LE 

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

COWN – 20DEC Expiration $17.5 Strike Price Call

ERII – 16AUG Expiration $10 Strike Price Call

HIBB – 20DEC Expiration $30 Strike Price Call

HIIQ – 16AUG Expiration $35 Strike Price Call

INVA – 20SEP Expiration $15 Strike Price Call

LE – 20DEC Expiration $12.5 Strike Price Call

All the best,
Roger Scott.