U.S. markets closed mostly higher for the fifth-straight session to push continued all-time and fresh closing highs as the start of 4Q earnings season gets underway.
The Dow, however, was slightly choppy throughout the session after peaking at 25,311 intraday before closing lower by 0.05%, or 13 points. The Nasdaq showed the most strength after rising 0.3% while tapping 7,161 and ending 4 points off its record high.
The S&P 500 was weak throughout the first half of trading before gaining 0.2% after kissing 2,748 ahead of the closing bell. The Russell 2000 also added 0.2%, or 2 points, after reaching an intraday high just shy of 1,563.
Utilities caught a bid after rising 0.9% while Real Estate and Energy were higher by 0.7% and 0.6% to pace sector leaders.
Health Care and Financials were the only sector laggards after giving back 0.4% and 0.1%, respectively.
Global Economy- European markets closed mostly higher on better-than-expected economic news. Germany’s DAX 30 and the Belgium20 advanced 0.4% while France’s CAC 40 and the Stoxx Europe 600 were up 0.3%. UK’s FTSE 100 fell 0.4%.
Eurozone December economic confidence rose 1.4 to a 17-year high of 116, stronger than expectations of for a rise of 0.2 to 114.8. The December business climate indicator was up 0.17 to a record high of 1.66, topping forecasts of 1.5.
Eurozone November retail sales rose 1.5% month-over-month, stronger than expectations of for a gain of 1.3%.
The Eurozone January Sentix investor confidence rose 1.8 to 32.9, and ahead of 31.3.
Asian markets stayed strong despite Japan’s Nikkei being closed for a holiday. South Korea’s Kospi jumped 0.6% while China’s Shanghai rallied 0.5%.
Australia’s S&P/ASX 200 gained 0.1% to close at a 10-year high
Hong Kong’s Hang Seng climbed 0.3%.
U.S. November consumer credit surged to $28 billion in November, the largest jump in 16 years, and easily ahead of expectations for an to increase $18 billion.
Market Sentiment- Atlanta Fed’s Raphael Bostic says the FOMC may not need to hike 3 or 4 times this year after expressing concerns over the Fed’s miss on inflation over the last six years.
He doesn’t see this as a breakout year and worries that inflation expectations are at risk of being anchored below the 2% mark. Policy is approaching a more neutral stance, he believes, and added he favors a gradual approach to removing accommodation.
The went on to add, tax cuts may provide a boost to the economy and suggest some upside risks to growth.
San Francisco Fed President John Williams said the U.S. is in a pretty good situation as the economy is doing great. He said he is not worried about inflation suddenly taking off and added that 3 Fed rate hikes this year makes sense to.
The iShares 20+ Year Treasury Bond ETF (TLT) closed in the red for the third-straight session after tapping a low of $125.17. Support at $125.50-$125.25 and the 50-day moving held into the closing bell with risk to $125-$124.75 on a close below the latter.
Resistance remains at $126-$126.25.
Market Analysis- The Spider Small-Cap 600 ETF (SLY) cleared the $134-$134.50 area late late week level and a 11-session trading range that lasted on the mid-December breakout above the $132 level.
We mentioned a close above $134.50 would be a bullish development for another run at fresh all-time highs up to $136.50-$137.50. Today’s high reached $135.13.
Rising support is at $134.75-$134.25 with a move back below $134 being a slightly bearish development. RSI has been in an uptrend but is leveling out with late November resistance at 70 in play.
Continued closes above this level would be bullish for a test towards 80-90 and late September and early October highs.
The Health Care Select Sector Spider (XLV) is in a triple-top breakout following last week’s move above resistance at $84-$84.25. Friday’s 52-week and all-time high of $85.33 and today’s test to $85.26 keeps fresh hurdles at $86.50-$87.50 in the mix.
Fresh support is at $85-$84.75 with a ćlose below $84.50 signaling a possible-short-term top. RSI is pushing October and November resistance at the 70 level.
Renewed momentum could reach 80-85 on continued closes above this level. This area represents the June 2017 highs. Near-term support is at 60 with a move back below this level being a slightly bearish development.
We are allocating the portfolio as follows:
25% in MAR closed on Monday at 136.34
25% in JBHT closed on Monday at 118.03
25% in TXN closed on Monday at 109.64
25% in TMF closed on Monday at 21.44
Option Traders.. the following (regular monthly) options meet our criteria:
MAR – APRIL 130 CALLS (Expiration Date APR 20, 2018)
JBHT – FEBRUARY 110 CALLS (Expiration Date FEB 16, 2018)
TXN – MARCH 100 CALLS (Expiration Date MAR 16, 2018)
TMF – FEBRUARY 22 CALLS (Expiration Date FEB 16, 2018)
All the best,
Roger Scott