U.S. markets closed slightly higher on Friday while holding positive territory throughout much of session despite disappointing factory data. The S&P 500 showed some mild weakness after the open and was the only index that dipped into negative territory before returning to strength.

President Trump bolstered market sentiment after he said certain restrictions against Chinese tech companies could be addressed in a trade deal but it wasn’t enough to avoid another negative week.

The good news is the major indexes held the late March lows for the second time this month while volatility eased into the holiday weekend.

The Russell 2000 rose 0.9% after testing a morning peak of 1,516.

Near-term and lower resistance at 1,510-1,525 was cleared and held with a close above 1,530 being a more bullish signal for a near-term bottom.

The Dow added 0.4% following the run to 25,670 shortly after the opening bell.

Prior and lower resistance at 25,500-25,750 was cleared and held with more important hurdles at 26,000 and the 50-day moving average.

The S&P 500 climbed 0.1% after tapping a first half high of 2,841.

Current and lower resistance at 2,850 held with a close back above 2,875 and the 50-day moving average signaling additional strength.

The Nasdaq also edged up 0.1% following the morning run to 7,694.

Prior and lower resistance at 7,700-7,750 was challenged but held with a close above 7,850-7,900 and the 50-day moving average leading to additional momentum.

For the week, the Nasdaq flopped 2.3% and the Russell 2000 fell 1.4%. The S&P 500 gave back 1.2% while the Dow was down 0.7%.

Financials were the strongest sector after rallying 0.8% while Materials gained 0.6%. Consumer Staples paced sector laggards with a decline of 0.4% while Utilities slipped 0.2%.

The best performing sectors for the week were Utilities (1.8%), Healthcare (1.3%) and Real Estate (0.3%). Energy (-3.3%) was the worst performing sector followed by Technology (-2.8%) and Consumer Discretionary and Communication Services (-2.1%).

The 1Q earnings season is rapidly winding down with roughly 94%, or 468 S&P 500 members reporting numbers.

Total earnings are up 0.1% on 4.8% higher revenues, with 76.7% besting EPS estimates and 59.6% topping revenue estimates.

With results from 72% of the Retail sector stocks in the S&P 500 out, total earnings and revenues for the sector are up 13.7% and 8.3% respectively, with 75% ahead of EPS estimates and 53.6% beating revenue estimates.

Total earnings for the Tech sector are down -7.7% from the same period last year on 3.1% higher revenues, with 82.5% beating EPS estimates and 71.9% topping revenue estimates, as 85% of Tech companies in the S&P 500 have reported.

Total earnings for the Finance sector with all results announced were up 2.7% on 8.2% higher revenues, with 78.4% topping EPS estimates and 61.9% ahead of revenue estimates.

Looking at Q1 as a whole, total S&P 500 earnings are expected to decline -0.2% from the same period last year on 5% higher revenues.

For the small-cap S&P 600 index, results from 548 index members or 91% of the index’s total membership are in the books.

Total earnings for these companies are down -19.1% from the same period last year on 3.1% higher revenues, with 55.5% beating EPS estimates and 56.4% besting revenue estimates.

Looking at Q1 as a whole for the small-cap index, total Q1 earnings are expected to be down -19.9% from the same period last year on 4.5% higher revenues.

For full-year 2019, total earnings for the S&P 500 index are expected to be up 2.2% on 3.2% higher revenues, which would follow the 23.3% earnings growth on 8.7% higher revenues in 2018.

Double-digit growth is expected to resume in 2020, with earnings expected to be up 10.8% that year.

For 2019 Q2, total earnings for the S&P 500 index are expected to be down -1.6% on 4.4% higher revenues.

Estimates for Q2 as well as full-year 2019 have come down, with the current 2.2% growth rate for full-year 2019 down from 9.8% in early October 2018.

Global Economy – European markets settled higher following Prime Minister Theresa May’s resignation, set for June 7th. The Conservative Party will start its leadership review in the June 10th week.

The Belgium20 rallied 0.8% while France’s CAC 40 and UK’s FTSE 100 advanced 0.7%.

The Stoxx 600 Europe was higher by 0.6% and Germany’s DAX 30 gained 0.5%.

Asian markets closed mixed Friday as traders remained cautious over the rhetoric between the U.S./ China and ongoing tariff chatter.

Hong Kong’s Hang Seng rose 0.3% and China’s Shanghai was up a half-point, or 0.02%.

South Korea’s Kospi was lower by 0.7% and Australia’s S&P/ASX 200 was hit for 0.6%. Japan’s Nikkei nudged down 0.2%.

Durable Goods Orders fell 2.1% in April following a 1.7% March rebound, missing forecasts for a decline of 2%. Transportation orders declined 5.9%, erasing the prior 5.9% increase.

Excluding transportation, orders were unchanged following the prior 0.5% decline, and better than forecasts for a dip of 0.1%.

Non-defense capital goods orders excluding aircraft were down 0.9% from 0.3%. Shipments slid 1.6% after falling 0.5%.

Nondefense capital goods shipments ex-air were flat from -0.6%. Inventories rose 0.4% versus 0.3% previously. The inventory-shipment ratio increased to 1.67 from 1.64.

Hughes reports reported the U.S. rig count was down 4 rigs from last week to 983, with oil rigs sliding 5 to 797, gas rigs up 1 to 186, and miscellaneous rigs unchanged at 0.

The U.S. Rig Count is down 76 rigs from last year’s count of 1,059, with oil rigs declining 62, gas rigs down 12, and miscellaneous rigs off 2. The U.S. Offshore Rig Count was unchanged at 22 and is up 3 rigs year-over-year.

NY Fed’s Q2 GDP nowcast trimmed growth to 1.41%, versus 1.79% last week, and down from 2.20% in early May. Also, the Atlanta Fed’s GDPNow index is at 1.261%, versus the 1.278% after last week’s economic data.

Analysts also revised Q2 GDP forecast lower to 1.6% from 1.8% previously.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 3rd-straight session after testing an intraday high of $127.78. Fresh and lower resistance from January 2016 at $128-$128.50 held for the 2nd-straight session.

A close above the latter gets $129.50-$130 in focus.

Near-term support remains at $127-$126.50.

A close back below $126 would signal a possible near-term top.

RSI is pushing late March resistance at 70-75.

There is a chance for a run at 80 and the mid-December peak on a move above the latter. Support is at 65-60 with a move below the latter signaling additional weakness.

Market Analysis – The Russell 2000 ETF (IWM) rebounded while trading to an intraday high of $151.09. Current and lower resistance at $151-$151.50 held. Continued closes back above the $152.50 level would signal a possible run towards the 200/50-day moving averages.

Near-term support is at $150-$149.50.

A close below the latter and the late March low of $148.41 would signal a further backtest towards the $148-$147.50 area and early February levels.

RSI is back in a slight uptrend with resistance at 45-50. A move above the latter and prior support from earlier this month level would be a bullish development for additional strength towards 55-60.

Current support is at 35 and the monthly low.

The Spider Gold Shares (GLD) was up for the 2nd-straight session after reaching a peak of $121.31.

Lower resistance at $121.50-$122 and the 50-day moving average easily held with continued closes above the latter signaling a possible near-term bottom.

Near-term support is at $120.50-$120. A close below the $119.50 level and the late April/ early May lows would be a bearish development for additional weakness towards $119-$118.50 and the 200-day moving average.

RSI has leveled out after clearing resistance at 50.

Continued closes above this level would be a bullish signal for a possible push towards 55-60 with the latter representing this month’s high. Support is at 45-40.

The percentage of Nasdaq 100 stocks trading above the 200-day moving average closed Friday at 56.31%, the session low and matched in late March.

Near-term support at 57.5%-55% was split on the close below the former. A move below the latter would being a continuing bearish development for additional weakness towards the 52.5%-50% area and early February lows.

Resistance is at 58%-60%. A close above the latter would be a slightly bullish signal for additional strength towards 62.5%-65%.

The percentage of S&P 500 stocks trading above the 50-day moving average settled at 41.98% with the session high reaching 43.36%.

Near-term resistance at 42.5%-45% held with a move above the latter signaling additional strength towards 47.5%-50%.

Current support at 40%-37.5% with last week’s low tapping 37.42%.

A move below 37.5% opens up additional weakness towards 35%-32.5% with the monthly low at 33.46%.

We are holding the following positions:

LRCX:  +25% Allocation | $180.40 Protective Stop Loss | $209.23 Profit Objective
ADBE+25% Allocation | $256.54 Protective Stop Loss | $306.29 Profit Objective
CELG:  +25% Allocation  |  $87.00 Protective Stop Loss  |  $106.15 Profit Objective
FB:  +25% Allocation  |  $171.38 Protective Stop Loss  |  $207.05 Profit Objective

Option Traders – the following (regular monthly) options meet our criteria:

LRCX – 20SEP $205 Strike Price CALL (Expires September 20, 2019)
19JUL $290 Strike Price CALL (Expires July 19, 2019)
– 19JUL $95 Strike Price CALL (Expires July 19, 2019)
FB – 19JUL $190 Strike Price CALL (Expires July 19, 2019)

All the best,
Roger Scott.