U.S. markets continued their assault on all-time highs ahead of President Trump’s speech on trade policy at the Economic Club of New York. There was no fresh news on the U.S./ China trade front as Trump continued to repeat rhetoric an initial Phase 1 deal is close to being completed.
The major indexes faded off the highs in the final hour of action and dipped into the red after Larry Kudlow, Director of the National Economic Council, said no tariff adjustments will be made unless there is trade deal.
The mostly higher close and tight trading ranges are signaling a possible consolidation phase for the overall market as long as volatility remains calm.
The Nasdaq was up for the 3rd time in 4 sessions after rising 0.3% while trading to an all-time intraday high of 8,514. Fresh and lower resistance at 8,500-8,550 was cleared but held with additional hurdles at 8,600-8,650 on a close above the latter.
The S&P 500 gained 0.2% with the midday and new record high reaching 3,102. Major resistance at 3,100 was cleared but held with uncharted territory towards 3,125-3,150 on continued closes above this level.
The Russell 2000 nudged up a third-point, or 0.02%, with the session peak reaching 1,604 shortly after the open. Near-term and lower resistance at 1,600-1,615 was cleared but held with a close above the latter and the May 52-week high at 1,618 getting 1,625-1,640 back in play.
The Dow was unchanged for the first time since 2001 after trading in a 135-point range while testing a high of 27,770. Key resistance at 27,750 was cleared but held with a close above this level and last week’s all-time top of 27,774 signaling blue-sky territory towards the 28,000 area.
Healthcare and Materials were higher by 0.6% and 0.5%, respectively, to lead sector strength. Real Estate and Energy were the weakest sectors after falling 0.7% and 0.5%, respectively.
Global Economy – European markets closed higher across the board following news President Trump could delay a decision on whether to impose tariffs on European Union automobile imports from December until May 2020.
The Belgium20 rallied 0.8% and Germany’s DAX 30 was up 0.7%. UK’s FTSE 100 added 0.5% while the Stoxx 600 and France’s CAC 40 rose 0.4%.
UK unemployment fell to 3.8% in September versus expectations for a print of 3.9%, while wage growth disappointed at a 3.6% rate versus forecasts of 3.8%.
German ZEW survey indicated economic sentiment jumped from -22.8 in October to -2.1 for November while topping forecasts for a reading of -13.
Asian markets settled mostly higher despite ongoing concerns over the state of U.S./ China trade negotiations as well heightened escalation of violence during protests in Hong Kong.
South Korea’s Kospi and Japan’s Nikkei advanced 0.8%. Hong Kong’s Hang Seng was higher by 0.5% and China’s Shanghai edged up 0.2%. Australia’s S&P/ASX 200 fell 0.3%.
China’s auto sales fell 5.8% from a year earlier in October as demand for electric cars plunged. Meanwhile, China total vehicle sales, including trucks and buses, shrank 0.6% to 2.3 million.
NFIB Small Business Optimism Index checked in with a reading of 102.4 for October, topping forecasts of 102.
Redbook Store Sales up 5% for the year in the week ending November 9th.
US chain store sales rose 1.8% last week, after a 1.2% gain the prior week. Compared to the same week last year, sales jumped 4.3% year-over-year, the strongest rate for 2019, and nearly triple the prior 1.6% clip. The data is suggesting the holiday season could be getting off to a solid start.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) showed strength for the 2nd-straight session after testing an intraday high of $135.95. Near-term and lower resistance at $135.50-$136 was recovered with more important hurdles at $137.50-$138.
Near-term support is trying to move up to $135-$134.50.
Market Analysis – The S&P 400 Mid Cap Index ($MID) extended its losing streak to 2-straight sessions despite trading to a high of 2,002 shortly after the opening bell.
Near-term and lower resistance at 2,000-2,010 was cleared but failed to hold. Continued closes above the latter and last week’s 52-week high of 2,009 would be a bullish signal for a breakout towards 2,040-2,060. The all-time high from August 2018 is at 2,053.
The 2nd half fade to 1,988 kept an ongoing 7-session trading range intact with current and upper support at 1,990-1,980 getting breached but holding by a point.
A close below the latter would signal a near-term top with pullback potential towards 1,960-1,940 and the 50-day moving average.
RSI is in a downtrend with support at 60 and a level that has been holding since late October. A move below 60 would signal additional weakness towards 55-50. Resistance is at 65-70.
The iShares MSCI Emerging Markets Fund (EEM) fell for the 3rd-straight session following the intraday backtest to $43.01. Current and upper support at $43-$42.75 held.
A close back below the $42.50 level would be an ongoing bearish signal with backtest potential towards $42.25-$42.
Near-term resistance is at $43.25-$43.50.
A close above the $43.75 level would be a renewed bullish signal for a retest towards $44-$44.25. The current 52-week peak from mid-April is at $44.84.
The 50-day moving average remains on track to clear the 200-day moving average to form a golden cross. This is typically a bullish signal for higher highs.
RSI remains in a downtrend with upper support at 55-50 holding. A move below the latter would signal additional weakness towards 45-40 and October lows.
Resistance is at 60 with continued closes back above this level signaling a retest and strength towards 65-70.
We are holding the following positions:
AMGN: +25% Allocation | $203.18 Protective Stop Loss | $246.67 Profit Objective
CTXS: +25% Allocation | $100.85 Protective Stop Loss | $123.93 Profit Objective
KLAC: +25% Allocation | $158.96 Protective Stop Loss | $194.47 Profit Objective
MCHP: +25% Allocation | $87.02 Protective Stop Loss | $106.71 Profit Objective
AMGN – 17JAN $225 Strike Price CALL(Expires January 17, 2020)
CTXS – 17JAN $110 Strike Price CALL (Expires January 17, 2020)
KLAC – 17JAN $175 Strike Price CALL (Expires January 17, 2020)
MCHP – 17JAN $97.5 Strike Price CALL (Expires January 17, 2020)
All the best,