U.S. markets were choppy on Thursday after trading on both sides of the ledger while settling higher for the 2nd-straight session. Better-than-expected economic news helped sentiment with the tight trading ranges and higher closes being good indications a near-term bottom is trying to form.

The major indexes are still down for the week and will need to show continued strength to keep the near-term technical rebound intact. The Russell 2000, S&P 500 and the Nasdaq have recovered and held their 20-day moving averages over the past 2 sessions. Volatility also settled lower and continues to push prior levels of support to keep the near-term bullish outlook intact.

The S&P 500 gained 0.2% after trading to a late day high of 3,119. Resistance at 3,125 held for the 2nd-straight session with a move above this level signaling additional strength towards 3,150-3,175 and the all-time record high at 3,154.

The Dow was up 0.1% following the push to 27,745 ahead of the closing bell. Current and lower resistance at 27,800-28,000 was challenged but held with continued closes above the latter getting 28,200-28,400 and the all-time high of 28,174 in play.

The Russell 2000 added a point, or 0.1%, after topping out at 1,620 shortly after the opening bell. Near-term and lower resistance at 1,615-1,625 was cleared but held for the 2nd-straight session with a close above the latter getting 1,635-1,650 and last week’s 52-week peak at 1,634 back in focus.

The Nasdaq also edged up 0.1% after trading in a 47-point range while testing a morning high of 8,588. Current and lower resistance at 8,600-8,650 was challenged but held with a close above the former getting 8,700 and the all-time high at 8,705 back in focus.

Technology and Materials led sector strength after advancing 0.3%.
Energy and Consumer Discretionary paced sector laggards after sliding 0.3% and 0.1%, respectively.

Global Economy – European markets showed weakness ahead of the beginning of the OPEC meetings.

Germany’s DAX 30 and UK’s FTSE 100 were down 0.7%. The Belgium20 and the Stoxx 600 slipped 0.1%. France’s CAC 40 was up 2 points, or 0.03%.

Eurozone seasonally adjusted GDP rose by 0.2% across the 19 country-strong currency area, and by 0.3% across the wider 28-strong trading bloc, matching forecasts. GDP rose by 0.2% in both zones in the second quarter. Year-over-year, GDP was unchanged at 1.2% in the Eurozone and at 1.2% in the EU28.

Household final consumption rose by 0.5% in the Eurozone, helped by stronger demand for durable goods in Germany. Government spending slowed marginally, but still came in at 0.4%.

Germany’s Factory Orders dropped 0.4% in October, missing estimates for a 0.4% gain.

Asian markets closed mostly higher On hopes of a preliminary U.S./ China trade deal before further tariffs kick in on Dec. 15th.

Australia’s S&P/ASX 200 rallied 1.2% while Japan’s Nikkei and China’s Shanghai rose 0.7%. Hong Kong’s Hang Seng added 0.6% and South Korea’s Kospi was down 0.4%.

Australia’s retail sales were largely flat from the previous month, below expectations for a 0.3% increase.

Initial Jobless Claims fell 10,000 to 203,000, versus expectations for a print of 214,000, and follows the prior week’s drop of 15,000 to 213,000.

The 4-week moving average declined to 217,750 versus 219,750 previously. Continuing claims increased 51,000 to 1,693,000 following the prior 55,000 decline to 1,642,000.

November Challenger Job-Cut Report Announced Layoffs of 44,569.

Factory Orders increased 0.3% in October, matching estimates, alongside a flat print on shipments and a 0.1% gain in inventories. Transportation orders increased 0.7% in October versus the -3.2% September decline. Excluding transportation, orders were up 0.2% versus -0.3%.

The key nondefense capital goods orders excluding aircraft bounced 1.1% after falling -0.5% in September. Nondefense capital goods shipments ex-aircraft increased 0.8%, reversing the prior -0.8% drop. The inventory-shipment ratio was flat at 1.40 for second straight month, from 1.39 in August.

The International Trade deficit narrowed -7.6% to -$47.2 billion in October after shrinking -4.6% to -$51.1 billion in September. Exports declined 0.2% after September’s -0.9% slide while imports dropped -1.7% versus -1.6% previously.

The real deficit was at -$79.1 billion versus -$83 billion as exports fell -0.5% and imports were down -2% after prior respective declines of -1.2% and -1.9%.

The trade balance with China was at -$31.3 billion versus -$31.6 billion and was -$3.4 billion with Canada versus -$2.6 billion, previously. Mexico’s balance was -$8.8 billion in October versus -$8.9 billion.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd-straight session and the 5th time in 6 sessions with the low reaching $138.60.

Prior and upper support at $138.50-$138 held.A close below the latter would signal additional weakness towards $137-$136.50.

Lowered resistance is at $139.50-$140 and the 50-day moving average.

Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) was up for the 2nd-straight session with the session high reaching $277.76. Prior and lower resistance from mid-November at $277.50-$278 was cleared but held.

A close above the latter and the 20-day moving average would be an ongoing bullish development with additional momentum towards $279.50-$280.

Near-term support is at $277-$276.50 with backup help at $275.50-$275.

A close below the latter would reverse Wednesday’s island reversal candlestick and typically a bullish technical signal of a near-term bottom.

RSI is back in a slight uptrend with resistance at 55-60.

Continued closes above the former would signal additional strength towards 65-70. Support is at 50-45 with a move below the latter being a renewed bearish signal.

The Industrials Select Sector Spider (XLI) extended its winning streak to 2-straight sessions after tapping an intraday high of $80.33. Near-term and lower resistance at $80.50-$81 was challenged but held.

Continued closes above the latter would be an ongoing bullish signal for a retest towards $82-$82.50.

Current but shaky support is at $80-$79.50.

A close below $79 and the 50-day moving average would be a renewed bearish development with risk towards $78-$77.50. Tuesday’s low kissed $79.26.

RSI has leveled out with resistance at 50.

A move above this level would signal additional strength towards 55-60. Support is at 45-40. A move below the latter would signal additional weakness towards 35-30 and lows from early October and August.

We are allocating the portfolio as follows:

30% in SWKS closed on Thursday at 99.98
30% in QRVO closed on Thursday at 105.80
30% in CVS closed on Thursday at 74.48
10% in TMF closed on Thursday at 28.11

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

30% in SWKS – 21FEB $100 Strike Price CALL (Expires February 21, 2020)
30% in QRVO – 21FEB $105 Strike Price CALL (Expires February 21, 2020)
30% in CVS – 21FEB $77.5 Strike Price CALL (Expires February 21, 2020)
10% in TMF – 21FEB $28 Strike Price CALL (Expires February 21, 2020)

All the best,
Roger Scott.