U.S. markets set another round of record highs on Wednesday after President Trump said that the U.S. and China were in the the final throes of hammering out a phase 1 trade deal.

The rhetoric continues to reaffirm a deal may be announced in the near-term, however, the next phases are expected to be much more difficult.

Upbeat economic news also helped sentiment as GDP and employment numbers came in better than expected. The extended gains helped keep the major indexes on track for their best month since June with volatility still signaling a relaxed trading environment.

The Nasdaq jumped 0.7% while closing at an all-time and session high of 8,705. Fresh and lower resistance at 8,700-8,750 was cleared and held with a close above the latter getting 8,800-8,850 in focus.

The Russell 2000 rallied 0.6% on the closing high of 1,634 and fresh 52-week peak. Lower resistance at 1,625-1,640 was cleared and held to keep upside potential towards 1,650-1,665 in play.

The S&P 500 added 0.4% after testing a late day record peak of 3,154. Key resistance at 3,150 was cleared and held with fresh hurdles now at 3,175-3,200.

The Dow was higher by 0.2% with the record high reaching 28,174 ahead of the closing bell. Near-term and lower resistance at 28,200-28,400 was challenged but held with momentum towards 28,600-28,800 on closes above the latter levels.

Consumer Discretionary paced sector strength with a gain of 0.9% while Technology and Healthcare added 0.5%. Industrials were the only sector laggard after giving back 0.2%.

Global Economy – European markets hit a 4-year high as comments from President Trump sparked hopes of an imminent resolution to the prolonged trade war with China.

UK’s FTSE 100 and Germany’s DAX 30 advanced 0.4%. The Stoxx 600 was higher by 0.3% and the Belgium20 edged up 0.2%. France’s CAC 40 dipped 0.1%.

Asian markets closed mostly higher despite disappointing economic news out of China.

Australia’s S&P/ASX 200 jumped 0.9% while South Korea’s Kospi and Japan’s Nikkei climbed 0.3%. Hong Kong’s Hang Seng added 0.2%. China’s Shanghai slipped 0.1%.

China Industrial Profits fell 9.9% in October to 427.56 billion yuan ($60.74 billion), marking the biggest drop since the January-February period and follows the 5.3% decline in September.

The BoJ’s Sakurai sounded cautious on additional easing, saying the central bank can afford to monitor data if the impact of external woes are limited, although he also stressed that bold moves will be necessary if they threaten financial stability in Japan.

MBA Mortgage Applications rebounded 1.5%, after dropping -2.2% in the prior week. Refinancings continued to drive applications, rising 4.2% following the prior -7.7% drop and comprising 62% of applications.

The purchase index declined 1.2% after a prior gain of 6.7%. On a 12-month basis, mortgage applications are up 152.9% year-over-year, largely reflelcting the positive effects of lower mortgage rates.

Refinancings are up 313.9% year-over-year, while purchase applications are at a 54.8% pace. The 30-year fixed mortgage rate dipped to 3.97% from 3.99% previously, and is down from a 5.12% rate a year ago.

Durable Goods Orders rose 0.6% in October, easily topping estimates of 0.2%, and follows September’s -1.4% decline. Transportation orders rose 0.7% after tumbling -3.2% previously.

Excluding transportation, orders edged up 0.6% from -0.4%. Nondefense capital goods orders excluding aircraft surged 1.2% from -0.5% previously. Shipments were unchanged after falling -0.7% in September.

Nondefense capital goods shipments excluding aircraft rose 0.8%, erasing the prior -0.8% pullback. Inventories were up 0.3% after the prior 0.5% gain. The inventory-sales ratio edged up to 1.72 from 1.71.

GDP was bumped up to 2.1% in the second reading, better than expectations of 1.9% from the Advance report. Growth was at a 2% rate in Q2 and 3.1% in Q1.

Personal consumption remained solid, but unchanged at the prior 2.9% pace from the Advance data, while fixed investment was nudged up from -1.3% previously to -1%.

Intellectual property was revised down to a 5.1% rate from 6.6% while government was revised down to 1.6% from 2%. Inventories added $10.4 billion to growth after subtracting -$0.4 billion in the Advance release. Net exports subtracted -$7.6 billion versus -$5.7 billion previously.

The chain price index was revised up to 1.8% versus 1.7%, but it was at 2.4% in Q2, with the core rate slipping to 2.1% versus 2.2%, and was at 1.9% in Q2.

Initial Jobless Claims fell 15,000 to 213,000 versus forecasts of 218,000. This left the 4-week moving average at 219,750 from 221,250 previously. Continuing claims fell 57,000 to 1,640,000 following the prior 3,000 increase to 1,697,000.

Personal Income for October was flat, with spending up 0.3%. There were no revisions to September’s respective gains of 0.3% and 0.2%. Compensation increased 0.4% versus the prior 0.1% gain in September.

Wages and salaries were also up 0.4%, from a revised 0.1% gain. Disposable income dipped -0.1% versus 0.3% previously. The savings rate dropped to 7.8% from 8.1%. Real personal spending edged up 0.1% from 0.2%.

The PCE chain price index rose 0.2% from unchanged, with the core rate up 0.1% from unchanged. The 12-month headline rate was steady at 1.3% year-over-year, while the core rates slipped to 1.6% year-over-year versus 1.7%.

Pending Home Sales Index fell -1.7% to 106.7 in October following September’s 1.4% gain to 108.6. The index is up from 102.2 last October, and is up 3.9% year-over-year versus 6.3% in September.

Chicago PMI bounced 3.1 points to 46.3 in November, versus forecasts for a print of 46, while erasing the -3.9 point drop 43.2 in October. The 3-month moving average dipped to 45.5 from 46.9.

The Fed’s Beige Book summary said the economy continued to expand modestly, with manufacturing picking up, while the labor market remained tight.

Consumer spending was stable to growing moderate and the picture on nonfinancial services remained quite positive.

The report also noted employment continued to rise slightly overall, even as labor markets remained tight, and the vast majority of Districts continued to note difficulty hiring driven by a lack of qualified applicants.

On wages, the report said growth was moderate but pressures intensified for low-skilled positions while prices rose at a moderate pace. Other details included flat to mostly firmer home sales, while residential construction experienced more widespread growth compared to the prior report.

Corporate Profits After-tax were down -0.4% for the year.

November Survey of Business Uncertainty Expectations Index at 90.6

Baker-Hughes Rig Count reports the U.S. rig count is down 1 rig from last week to 802, with oil rigs down 3 to 668, gas rigs up 2 to 131, and miscellaneous rigs unchanged at 3.

Farm Prices for October were down 0.6%.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) fell for the first time in 4 sessions following the intraday backtest to $140.42. Current and upper support at $140.50-$140 was breached but held.

A close below the latter and the 50-day moving average would be a slightly bearish signal with downside risk towards $138.50-$138.

Near-term resistance from late October remains $141-$141.50.

The Wilshire 5000 Composite Index ($WLSH) extended its winning streak to 4-straight sessions after trading to an all-time intraday high of 32,171.

Unchartered and lower resistance at 32,200-32,400 was challenged but held.

Current and key support is at 32,000. A close below this level would signal additional weakness towards 31,800-31,600.

RSI remains in an uptrend after clearing lower resistance at 75-80 and severely overbought levels from January 2018.

Support is at 70 with weakness towards 65-60 on a move below this level.

The Energy Select Sector Spider (XLE) extended it flip flopping action for the 4th-straight session after trading to an intraday high of $59.61. Near-term and lower resistance at $59.50-$60 was cleared but held by a penny.

A close above the $60.50 would be a more bullish signal for a retest towards $61-$61.50 and the 200-day moving average.

Current and key support is at $59 and the 50-day moving average.

A close below this level would be an ongoing bearish signal with backtest potential towards $58.50-$58.

RSI has flatlined and is holding support at 50.

A close below this level would be a bearish signal for additional weakness towards 45-40. Resistance is at 55-60.

All the best,
Roger Scott.