U.S. markets settled mixed on Thursday as corporate earnings dictated the action for the major indexes.
Tech helped the Nasdaq to another fresh all-time high while the Dow was hurt by some disappointing numbers from the Transports and Industrials sectors.
Meanwhile, the small-caps struggled after trading in negative territory throughout the session.
Volatility spiked to its 2nd-highest level of the month but held major resistance while testing lower lows afterwards.
The Nasdaq gained 0.2% following the opening pop to 8,151 and fresh all-time high.
Lower resistance at 8,150-8,200 was cleared but held with breakout potential towards 8,250-8,400 on a move above the latter.
The Russell 2000 fell 0.8% after testing an intraday low of 1,565.
Prior and upper support at 1,565-1,550 held with a close below the latter and the 50/200-day moving averages being a bearish signal.
The Dow stumbled 0.5% after testing a morning low of 26,310.
Upper support at 26,500-26,250 was breached and failed to hold with a close below the latter getting 26,000 and the 50-day moving average in play.
The S&P 500 dipped a point, or 0.04%, despite the intraday push to 2,933.
Lower resistance and the all-time high at 2,940 held for the 3rd-straight session with a close above 2,950 signaling additional momentum.
Communications Services and Healthcare paced sectors after rising 1.1% and 1%, respectively. Utilities were up 0.4%.
Industrials tanked 2% to lead sector weakness.
Materials sank 1.3% and Consumer Staples were down 0.6%.
Global Economy – European markets settled lower across the board following disappointing corporate earnings.
The Belgium20 declined 1% and UK’s FTSE 100 fell 0.5%. Germany’s DAX 30 and France’s CAC 40 dropped 0.3% while the Stoxx 600 Europe was off 0.2%.
Asian markets settled mixed following news China could pull back on stimulus measures following recent and better-than-expected economic data.
China’s Shanghai plunged 2.4% and Hong Kong’s Hang Seng sank 0.9%. South Korea’s Kospi was down 0.5%. Australia’s S&P/ASX 200 jumped 1% and Japan’s Nikkei rose 0.5%.
The BOJ held its monetary policy steady and intends to keep interest rates extremely low until at least 2020.
Governor Haruhiko Kuroda added rates could be kept ultra-low even longer, as weaker global demand and China/ U.S. trade tensions were taking a toll on the export-reliant economy.
South Korea’s 1Q GDP declined a seasonally adjusted 0.3% from the previous quarter, the worst contraction since a 3.3% drop in late 2008, and sliding from 1% growth in 4Q.
Initial Jobless Claims rose 37,000 to 230,000, outpacing expectations for a rise to 209,000. The 4-week moving average came in at 206,000 from 201,500. Continuing claims edged up 1,000 to 1,655,000 after dropping 62,000 to 1,654,000 previously.
Durable Goods Orders rebounded 2.7% in March, much stronger than expectations of 0.8%, and follows the 1.1% drop in February. Transportation orders increased 7% after last month’s 2.9% decline.
Excluding transportation, orders were up 0.4% from the prior 0.2% dip, topping forecasts for a rise of 0.2%. Non-defense capital goods orders excluding aircraft jumped 1.3%, representing the biggest gain since July, after edging up 0.1% last month.
Shipments increased 0.3% versus 0.3% previously.
Non-defense capital goods shipments excluding aircraft fell 0.2% versus February’s 0.2% gain. Inventories were up 0.3% from 0.4% while the inventory-shipment ratio was steady at 1.62.
Kansas City Fed Manufacturing Index for April checked in at 5, well below estimates for a print of 10.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) had its 2-session winning streak snapped following the pullback to $123.10. Prior and upper support at $123-$122.50 held.
A close below the latter and the 50-day moving average would be a bearish signal for additional weakness.
Resistance remains at $123.50-$124.
Market Analysis – The Russell 2000 ETF (IWM) fell for the 1st time in 3 sessions following the backtest to $155.47. Near-term and upper support at $155.50-$155 held with a close below the latter and the 50/ 200-day moving averages being a slightly bearish development.
Lowered resistance is at $157-$157.50.
Continued closes back above $158 would be a more bullish signal for a run towards $159.50-$160 and fresh 2019 highs. A golden cross is in the process of forming with the 50-day moving average on the verge of clearing the 200-day moving average.
RSI is in a downtrend with support at 50.
A close below this level would be a bearish signal for additional weakness towards 45-40 with the latter representing the March low. Resistance is at 60 and this month’s peak.
The Industrials Select Sector Spider (XLI) was in a nice uptrend before Thursday’s plunge to $76.59. Fresh and upper support at $76.50-$76 held.
A move below $75.50 and the 50-day moving average would be a bearish signal for additional weakness.
Near-term and lowered resistance is at $77.50-$78. Continued closes back above the latter would signal a possible return of momentum.
RSI is in a downtrend with support at 50. There is risk towards 45-40 and. March lows on a move below this level. Resistance is at 55-60.
We are allocating the portfolio as follows:
25% in SWKS closed on Thursday at 88.53
25% in PVH closed on Thursday at 130.03
25% in MCHP closed on Thursday at 95.42
25% in TMF closed on Thursday at 20.14
Option Traders – the following (regular monthly) options meet our criteria:
SWKS – AUG 90 Strike Price CALL (Expires August 16, 2019)
PVH – JUN 130 Strike Price CALL (Expires June 21, 2019)
MCHP – JUN 95 Strike Price CALL (Expires June 21, 2019)
TMF – AUG 20 Strike Price CALL (Expires August 16, 2019)
All the best,
Roger Scott.