U.S. markets avoided a three-session slide after squeaking out slight gains following another tight trading range. The Dow and S&P 500 climbed 0.1% and remain less than 1% away from all-time highs.

The Nasdaq rose 3 points, or 0.04%, but failed to take out the prior high from last Friday. The Russell 2000 pushed near-term resistance before slipping a third-point, or 0.02%, into the closing bell.

Real Estate and Utilities advanced 0.4% to lead sector strength. Energy and Consumer Staples fell 0.3% and 0.2%, respectively, while Consumer Staples dipped 0.02% and was the only other sector that finished in the red.

Global Economy- European markets traded mostly higher after reopening from a long four-day holiday weekend. UK’s FTSE 100 was higher by 0.4% and the Belgium20 advanced 0.2%.

The Stoxx Europe 600 and France’s CAC 40 added 0.1% while Germany’s DAX 30 dropped 3 points, or 0.02%.

Asian markets finished showed strength with China’s Shanghai sinking 0.9% to buck the trend. South Korea’s Kospi rallied 0.4% while Hong Kong’s Hang Seng, Japan’s Nikkei and Australia’s S&P/ASX 200 gained 0.1%.

China November industrial profits rose 14.9% year-over-year, the smallest increase in 7 months.

Japan November housing starts fell 0.4% year-over-year to 951,000 annualized, stronger than expectations for a decline of 2.5% to 934,000.

Japan November construction orders jumped 20.5% year-over-year, the biggest increase in 18 months.

U.S. same store sales grew 5.7% year-over-year in week ending December 23rd. Sales month to date grew 4.1% year-over-year, but were up just 0.1% on a month-over-month basis.

Sales for all of December are expected to be higher by 4.5% compared to December of last year while rising 0.5% versus November.

Redbook Store Sales were up 5.7% for the year for the week ending December 23rd.

Consumer Confidence Index decreased to 122.1 in December from 128.6 in November, missing forecasts for a print of 128.

The Pending Home Sales Index rose 0.2% to 109.5 in November from 109.3 in October. Expectations were for a gain of 0.5% for the month.

Market Sentiment- The iShares 20+ Year Treasury Bond ETF (TLT) closed higher for the 4th-straight session after jumping 1.3% and reaching a peak of $126.98 intraday. Fresh resistance at $127-$127.50 is back in play with a move above the latter being a continued bullish development.

Rising support is at $126-$125.75 followed by $125.50-$125.25 and the 50-day moving average.

We mentioned RSI was back in an uptrend and the close above prior resistance at 50 was also a positive sign for continued strength.

 

Market Analysis- The Russell 3000 Index ($RUA) traded to a high of 1,590 but shy of its recent all-time high of 1,594. Resistance is at 1,595-1,600 with a move above the latter likely leading to continued momentum towards 1,625-1,630.

Support is at 1,580-1,575 with a move below the latter likely signaling a short-term market peak.

RSI is trying to clear resistance 70-75 and late November and mid-December resistance. Continued closes above these levels would be bullish for a possible run towards 80 and October highs.

 

The Industrials Select Sector Spider (XLI) traded to an all-time high of $75.73 on Tuesday and was followed by today’s push to $75.69.

Continued closes above $75.75-$76 would be bullish for a possible push towards $77-$77.50. Near-term support is at $75-$74.75 with a close below $74.50 being a slightly bearish development.

RSI has failed resistance at 70 throughout the month but cleared this level today. Continued closes above this level could lead to a run towards 75-80 and September and October highs.

Support is at 65-60 from with a close below the former confirming upcoming weakness.

 

We are allocating the portfolio as follows:

25% in MAR closed at on Wednesday 136.25
25% in MNST closed at on Wednesday 64.23
25% in DLTR closed at on Wednesday 107.49
25% in TMF closed at on Wednesday 22.05

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

MAR – APRIL 130 CALLS (Expiration Date APR 20, 2018)
MNST – MARCH 60 CALLS (Expiration Date MAR 16, 2018)
DLTR – FEBRUARY 105 CALLS (Expiration Date FEB 16, 2018)
TMF – FEBRUARY 22 CALLS (Expiration Date FEB 16, 2018)

All the best,
Roger Scott