U.S. markets showed continued strength during the first half of Thursday’s action but weakened midday to finish slightly lower. The Dow traded to another all-time high for the second-straight session before sliding 0.3% to snap a five-session win streak.

The S&P 500 dipped 0.4% to finish lower for the first time in six sessions after failing fresh resistance.

The Nasdaq topped the 6,900 level for the first time this month but failed its lifetime high by 13 points before declining 0.3%. Meanwhile, the Russell 2000 continues to show the most recent volatility after sinking 1.1% while holding 1,500 and a level that has held as support since mid-November.

Consumer Staples and Real Estate were the only sectors that that closed in the green after gaining 0.3% and 0.1%, respectively. Materials and Health Care led sector laggards after stumbling 1.1% and 1%, respectively.

Global Economy- European markets showed continued weakness after a setback for British Prime Minister Theresa May and the defeat of the Brexit bill that potentially opens the way to a softer U.K. exit from the European Union.

France’s CAC 40 sank 0.8% and UK’s FTSE 100 slipped 0.7%. The Stoxx Europe 600 declined 0.5% while Germany’s DAX 30 and the Belgium20 fell 0.4%.

The Bank of England left its benchmark interest rate unchanged, as expected.

German December Markit/BME manufacturing PMI unexpectedly rose 0.8 to a record 63.3, stronger than expectations for a dip of 0.5 to 62.0.

The Eurozone December Markit manufacturing PMI unexpectedly rose 0.5 to a record 60.6, stronger than expectations of for a decline of 0.4 to 59.7.

Asian markets also closed lower across the board following mixed economic news out of China and Japan. South Korea’s Kospi gave back 0.5% while Japan’s Nikkei and China’s Shanghai stumbled 0.3%. Australia’s S&P/ASX 200 and Hong Kong’s Hang Seng dipped 0.2%.

China November retail sales grew 10.2% from a year earlier but slightly weaker than expectations of 10.3%.

China November industrial production fell 0.1 to 6.1% year-over-year, matching expectations.

The Japan December Nikkei manufacturing PMI rose 0.6 to 54.2, the fastest pace of expansion since Jan 2014.

Initial jobless claims dropped 11,000 to 225,000 in the second week of December and below expectations to hold steady at 236,000. Continuing claims dropped 27,000 to 1,886,000 versus expectations for a drop to 1,900,000.

November Import prices increased 0.7%, matching expectations, while export prices were up 0.5%, topping expectations for an increase of 0.2%.

Retail sales increased 0.8% month-over-month in November, which was stronger than the 0.3% forecast.

Markit’s manufacturing PMI jumped 1.1 points to 55 for December, after falling 0.7 points to 53.9 in November. However, PMI Composite Flash fell 1.4 points to 52.4 in the first look at December, after falling 0.8 points to 54.5 last month

Business inventories dipped 0.1% in October with sales up 0.6%, both matching forecasts.

Market Sentiment- Fed funds futures are slightly weaker after the FOMC maintained its median estimate for three tightenings in 2018.

The April implied rate is pricing in another 25 basis-point tightening at the March 20th, 21st FOMC meeting and is a little more than 50% of the way toward another hike at the September 25th, 26th meeting.

The iShares 20+ Year Treasury Bond ETF (TLT) traded higher for the second-straight session while reaching a peak of $127.98 intraday. Resistance at $127.50-$127.75 was cleared with closes above $128 being a continued bullish development.

The 52-week high is at $129.57 that was reached in early September. Rising support is at $127.25-$127.

 

Market Analysis- The PowerShares QQQ (QQQ) made a run to $156.66 with near-term resistance at $156.75-$157.50 holding. The recent all-time high is at $156.69 from late November with a close above the former being a continued bullish development.

Support is at $155-$154.50 with a move below $154 like.y leading to a further backtest towards early and mid-November support at $152 and the 50-day moving average.

RSI has leveled off above 60 with continued closes above this level keeping resistance at 70 in play. Support is at 50 on a close back below 60 and would signal upcoming weakness.

 

The Health Care Select Sector Spider (XLV) made a push towards resistance at $84-$84.25 and its recent 52-week and all-time high of $84.31 after peaking at $84.16.

A short-term double-top could be in the process of forming following the 1% intraday reversal. Support is at $82.50-$82.25 and the 50-day moving average on a close back below $83.

RSI failed resistance near the 70 level and is back in a downtrend. Near-term support is at 50 on continued weakness.

We are allocating the portfolio as follows:

25% in MNST closed on Thursday at 63.13
25% in SBAC closed on Thursday at 165.71
25% in ADBE closed on Thursday at 176.00
25% in TMF closed on Thursday at 22.64

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

MNST – JANUARY 61.67 CALLS (Expiration Date JAN 19, 2018)
SBAC – MARCH 160 CALLS (Expiration Date MAR 16, 2018)
ADBE – JANUARY 175 CALLS (Expiration Date JAN 19, 2018)
TMF – FEBRUARY 22 CALLS (Expiration Date FEB 16, 2018)

Thanks,

Roger Scott