U.S. markets were choppy throughout Tuesday’s session after trading on both sides of the ledger as Wall Street awaits Wednesday’s update from the Fed and a possible rate cut.

The pullback in oil removed some market uncertainty following reports Saudi output is close to restoring 70% of the 5.7 million barrels per day of production lost following the attacks on their production facilities.

Lost in the shuffle was news that President Trump said his administration has reached an initial trade agreement with Japan and will announce a deal in the coming weeks.

The mostly higher finish remains a slightly bullish signal as the major indexes remained within sticking distance of all-time highs.

The Nasdaq gained 0.4% following the late day push to 8,188.

Prior and lower resistance at 8,200-8,250 was challenged but held with a close above the latter getting 8,300-8,350 and the all-time high at 8,339 back in play.

The S&P 500 climbed 0.3% after tapping a high of 3,006 ahead of the closing bell.

Major resistance at 3,000 was reclaimed with fresh hurdles at 3,025-3,050 and the current all-time high just south of 3,028.

The Dow rose 0.1% while closing on its session peak of 27,110.

Near-term resistance at 27,250 easily held with a close above this level and the July all-time high at 27,398 getting 27,500-27,750 in focus.

The Russell 2000 fell 0.4% following the opening pullback to 1,569.

Current support at 1,575-1,565 held for the 2nd-straight session with risk towards 1,550-1,540 on a close below the latter.

Real Estate paced sector leaders after jumping 1.4% while Utilities and Materials gained 0.9% and 0.8%, respectively.

Energy was the weakest sector after giving back 1.4% while Industrials slipped 0.1% to round out the laggards.

Global Economy – European markets were mostly lower ahead of an impending meeting of the European Central Bank, with markets cautiously hopeful of a monetary stimulus package later this week.

The Belgium20 fell 0.4% and UK’s FTSE 100 was down 0.3%. Germany’s DAX 30 and the Stoxx 600 slipped 0.1%. France’s CAC 40 added 0.2%.

U.K. Prime Minister Boris Johnson said he would not request an extension to Brexit, after a new law came into effect demanding that he delay Britain’s departure from the EU until January 2020 unless he can secure a new Withdrawal Agreement.

Asian markets settled mixed as sentiment turned cautious over rising oil prices and heightened geopolitical tensions.

China’s Shanghai sank 1.7% and Hong Kong’s Hang Seng stumbled 1.2%. Australia’s S&P/ASX 200 rose 0.3% and Japan’s Nikkei edged up 0.1%. South Korea’s Kospi was up a tenth-point, or 0.01%.

Industrial Production was up 0.6% in August, matching forecasts, and follows July’s -0.1% decline. Capacity utilization climbed to 77.9% from 77.5% while manufacturing production rose 0.5% versus -0.4% previously.

Excluding vehicles, production was up 0.7% versus -0.2%. Machinery production increased 1.6% from -1.7% and computer production inched up 0.4% from the prior 0.1% gain. Utility production registered a 0.6% increase from 3.7% while mining rebounded to 1.4% from -1.5%.

NAHB Housing Market Index nudged up 1 point to 68 in September after rising 2 ticks to 67 in August, and the highest reading since last October.

The single family sales index increased 2 ticks to 75 from 73 while the future sales index dipped to 70 from 71. The index of prospective buyer traffic was steady at 50.

U.S. Chain Store Sales edged up 0.6%, from the prior week’s -2.9% tumble.

The 12-month pace accelerated to a 2.5% year-over-year, more than doubling the 1.1% rate, as dollar stores outperformed. Q2 sales are expected at a 1.6% year-over-year pace.

Redbook Store Sales up 5.4% for the year in the week ending September 14th.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd-straight day after testing an intraday peak of $139.60.

Prior and lower resistance at $139-$139.50 and the 50-day moving average was cleared and held with additional hurdles at $140-$140.50.

Rising support is at $138.50-$138.

Market Analysis – The Wilshire 5000 Composite Index ($WLSH) snapped a 2-session slide despite trading to an intraday low of 30,656.

Near-term but shaky support at 30,600-30,500 held with a close below the latter signaling additional weakness towards 30,250 the 50-day moving average.

Current and major resistance from late July at 30,750 was cleared and held on the late day bounce to 30,784.

Continued closes above this level keeps 31,000- 31,250 and the July all-time high at 31,168 in play.

RSI has been flatlining with late July resistance at 65.

A close above this level would signal a retest towards 70-75 and late April highs.

Support is at 60 with risk to 55-50 on a close below this level and the latter representing late August resistance.

The Communication Services Select Sector Spider (XLC) also,snapped a 2-session losing streak following the late day run to $51.16. Near-term and lower resistance at $51.25-$51.50 held.

A move above the latter would be a bullish signal for a retest towards $51.75-$52 with the 52-week and all-time peak at $51.87. (Note, the index made its debut on June 19th, 2018).

Near-term support is at $50.75-$50.50.

A close below the latter would be a slightly bearish signal with downside risk towards $50-$49.75 and the 50-day moving average.
RSI has been in a holding pattern with resistance at 60-65 and the latter representing the monthly high.

Continued closes above this level would be a bullish development for additional strength towards 70 and mid-July highs.

Support is at 55-50.

We are holding the following positions:

1. ENPH 2. IDT  

  1. IIPR
  2. OSTK
  3. PLAB 6. TLYS 

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

ENPH – 15NOV Expiration $25 Strike Price Call

IDT – 17JAN Expiration $12 Strike Price Call

IIPR – 17JAN Expiration $100 Strike Price Call

OSTK – 17JAN Expiration $30 Strike Price Call

PLAB – 20DEC Expiration $10 Strike Price Call

TLYS – 20DEC Expiration $10 Strike Price Call

All the best,
Roger Scott.