U.S. markets were choppy throughout Monday’s session following news China has become less optimistic about the prospects of reaching a trade deal with the U.S. Additionally, there is chatter China is also thinking about holding out until the 2020 elections, after President Trump declined to roll back tariffs.
The news tempered semtiment as futures were showing continued strength before the open following productive phone calls between the U.S. and China over the weekend. However, late day strength helped the major indexes tag another round of record highs with the small-caps slacking.
The Nasdaq nudged up 0.1% following the late day run to 8,559. Fresh and lower resistance at 8,550-8,600 was cleared but held by a smidge with blue-sky territory towards 8,650-8,700 on a move above the latter.
The Dow also advanced 0.1% after tapping a new all-time intraday high of 28,040. Uncharted and lower resistance at 28,250-28,500 held on the 2nd-straight close above the 28,000 level.
The S&P 500 was up over a point, or 0.05%, following the late day push to 3,124 and 4th-straight record close. Fresh and lower resistance at 3,125-3,150 held with strength towards 3,175-3,200 on a close above the latter.
The Russell 2000 was down 0.3% after trading in negative territory throughout the session with the low kissing 1,588. Current and upper support at 1,585-1,570 held with risk towards 1,550 and the 50-day moving average on a close below the latter.
Consumer Staples and Real Estate were sector standouts after rising 0.5%. Energy led sector laggards after sinking 1.2% while Industrials were down 0.4%.
Global Economy – European markets were mixed following ongoing trade rhetoric and the UK’s upcoming general election after political leaders pitched their promises to business leaders.
The Belgium20 rose 0.3% and UK’s FTSE 100 added 0.1%. Germany’s DAX 30 gave back 0.3% and France’s CAC 40 slipped 0.2%. The Stoxx 600 was down a fifth-point, or 0.01%.
Asian markets settled on both sides of the ledger following constructive phone conversations between Chinese Vice Premier Liu He, Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer regarding a phase-one trade deal.
Hong Kong’s Hang Seng jumped 1.4% and China’s Shanghai rose 0.6%. Japan’s Nikkei gained 0.5%. Australia’s S&P/ASX 200 fell 0.4% and South Korea’s Kospi slipped 0.1%.
The NAHB Housing Market Index slipped 1 point to 70 in November after jumping 3 points in October to 71. The weakness was in the single family sales index which decline to 76 after the 3 point increase to 78 in October.
The future sales index rose 1 point to 77 after surging 6 points to 76 in October.
The index of prospective buyer traffic dipped to 53 from 54, but has been at, or above the 50 expansion/contraction mark since August. Builder reported ongoing positive conditions, with lower mortgage rates and a strong job market.
Market Sentiment – Fed Chairman Jerome Powell met with President Trump and Treasury Secretary Mnuchin at the White House to discuss the economy, growth, employment and inflation. The invitation was at the President’s request with Trump describing the meeting as a very good one and cordial.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 5th time in 6 sessions after trading to an intraday high of $138.61. Current and lower resistance at $138.50-$139 was cleared but held.
A close above the latter would be an ongoing bullish signal for a retest towards $139.50-$140 and the 50-day moving average.
Near-term support is trying to move up to $138-$137.50. A move below the $137 level would be a slightly bearish development with backtest potential towards $136-$135.50.
Market Analysis – The Wilshire 5000 Composite Index ($WLSH) extended its winning streak to 5-straight sessions after trading to an all-time intraday high of 31,781. Fresh and lower resistance at 31,800-32,000 was challenged but held.
Current support is at 31,600-31,500 with the latter representing prior resistance before last week’s breakout. A close below the 31,500 level would signal additional weakness towards the 31,250 area and prior support to start the month.
RSI remains in a slight uptrend after clearing July resistance at 70 last Friday.
There is additional strength towards 75-80 but also signaling severely overbought levels from January 2018. Support is at 65-60 with the latter representing the late October low.
The Consumer Staples Select Spiders (XLP) was up for the 4th time in 5 sessions following the intraday push to a new record high of $61.99. Near-term and lower resistance at $61.50-$62 was cleared and held.
A close above the latter and the prior September all-time high at $61.92 would be ongoing bullish signals with blue-sky potential towards $63-$63.50.
Current support is at $61.25-$60.75 and the 50-day moving average. A close below the $60.25 level would be a fresh sell signal with downside risk towards the $59.75 area and prior lows from early October.
RSI remains in an uptrend after clearing resistance at 60 and the October peak.
Continued closes above this level would signal additional strength towards 65-70 with the latter representing the July high. Support is at 55-50.
We are allocating the portfolio as follows:
30% in QCOM closed on Monday at 90.40
30% in STX closed on Monday at 60.09
30% in URI closed on Monday at 153.27
10% in TMF closed on Monday at 27.42
Option Traders – the following (regular monthly) options meet our criteria:
30% in QCOM– 17Jan $92.5 Strike Price CALL (Expires January 17, 2020)
30% in STX – 17Jan $57.5 Strike Price CALL ( Expires January 17, 2020 )
30% in URI – 17Jan $155 Strike Price CALL ( Expires January 17, 2020 )
10% in TMF – 21FEB $30 Strike Price CALL (Expires February 21, 2020)
All the best,