U.S. markets set another round of fresh all-time highs as optimism on the U.S.-China trade front continues to rise. Reports that the U.S. and China held another phone conference provided a small lift to the major indexes throughout Tuesday’s session although trade details remain fluid.

The small-caps slightly lagged but also closed higher for the 3rd-straight session following the start of the week breakout to fresh 52-week highs. Meanwhile, volatility continues to simmer and remains on track to test 52-week lows.

The S&P 500 added 0.2% after testing a late day record peak of 3,142. Uncharted resistance at 3,150 was challenged and held with a close above this level leading to a possible trip towards 3,175-3,200.

The Nasdaq also climbed 0.2% following the intraday push to 8,659 and 2nd-straight closing all-time high. Fresh and lower resistance at 8,650-8,700 was cleared but held by a couple of points with a close above the latter signaling melt-up momentum towards 8,750-8,800.

The Dow was higher by 0.2%, as well, following the run to 28,146 and fresh all-time high ahead of the closing bell. Blue-sky and lower resistance at 28,250-28,500 easily held on the 2nd-straight close above the 28,000 level and 4th in the past 8 sessions.

The Russell 2000 edged up 0.1% after trading to a 1st half high of 1,630. New and lower resistance at 1,625-1,640 was cleared but held by a nearly a point with a close above the latter getting 1,650-1,665 and June 2018 levels in focus.

Real Estate and Consumer Staples were the strongest sectors strength after rising 1.4% and 0.8%, respectively. Energy was the weakest sector after sinking 1% while Financials and Healthcare slipped 0.1%.

Imports dropped -2.4% to $201.8 billion after falling -2.1% previously to $206.8 billion.

October Advance wholesale inventories rebounded 0.2% after dropping -0.7% in September, while retail inventories edged up 0.3% following the 0.2% increase in the prior month.

S&P Corelogic Case-Shiller home price index for September rose 0.07% to 218.27 for the 20-City index after inching up 0.04% to 218.12 in August.

The 12-month pace accelerated slightly to 2.10% year-over-year in September versus 2.02% in the prior month. The 10-City index inched up 0.03% to 230.89 in September following an unchanged August reading at 230.81. The 12-month pace was unchanged at 1.54% year-over-year.

For the annual rate, 19 of the 20 cities surveyed posted year-over-year gains led by Phoenix (6.02%). San Francisco was the only negative as the pace contracted at a -0.72% year-over-year clip.

FHFA House Price Index for September rose 0.6% to 279.2, matching forecasts, after August’s 0.2% increase to 277.5. Home prices were up 5.1% year-over-year, and all 9 regions surveyed posted annual gains, led by a 1.9% rise in the East South Central.

For Q3, house prices posted a 1.1% quarter-over-quarter gain, and a 4.9% year-over-year rise.

According to the report, housing prices have risen every quarter for the last 8 years (since Q3 2011), however, price gains are continuing to slow their upward pace in a few cities with large housing markets.

New Home Sales declined -0.7% to 733,000 in October, stronger than expectations of 707,000, after a revised 4.8% pop in September to 738,000. The months’ supply inched up to 5.3 from 5.2, with 322,000 homes for sale in October versus September’s 321,000 supply.

The median sales price rose 2.1% to $316,700 after sliding to $310,200 in September.

The 12-month pace of decline slowed to -3.5% year-over-year versus -5.5%.

Consumer Sentiment for November dipped -0.6 points to 125.5, below forecasts for a rise to 126.9, after dipping -0.2 ticks to 126.1 in October. All of the weakness was in the current conditions index which fell to 166.9 from 173.5.

The expectations component rose to 97.9 from 94.5 in October while breaking a string of 3 consecutive monthly declines. The labor market index dropped to 32.1 from 36.1.

The 12-month inflation gauge dropped to 4.4% from 4.8% in September and October.

Richmond Fed Manufacturing Index tumbled 9 points to -1 in November, missing estimates for a print of 6, after rebounding 17 points to 8 in October. The employment index dropped to 5 from 13, while wages jumped to 24 from 15.

The workweek slumped to 3 from 10, and new order volumes dropped to -3 from 7. Capex rose to 1 from 0. Prices paid were slower at 1.55% from 2.40%, while prices received rose to a 1.80% pace from 1.71%.

The 6-month shipment index improved to 31 in November from 24 in October, while the employment component fell to 13 from 20, and the wage component rising to 62 from 54.

The 6-month new order volume index pulled back to 30 from 33, while prices received accelerated and prices paid slowed.

Chain store sales climbed 1.6% last week, following the prior week’s 0.5% increase. The 12-month pace jumped to 4.5% year-over-year, versus 2.8% previously.

Strength was widespread, with those leading on a 12-month basis being drug, home improvement, traditional grocery stores, wholesale clubs and discount sales.

The report noted that while holiday shopping was well underway, slightly less than half of consumers who plan to shop this holiday season have begun, which trails the pace over the comparable periods the prior 2 years.

Market Sentiment – Fed Chairman Jay Powell hinted that interest rates are unlikely to rise anytime soon, saying that the central bank remains firmly committed to meeting its inflation goals.

He said the Fed’s monetary policy stance is appropriate, for now, though he noted the central bank is not on a preset course.

Powell expressed a sense of urgency in meeting the inflation part of the Fed’s dual mandate. He said low inflation expectations feed on themselves and make it tougher for the Fed to support the economy.

Powell said at this point in the long expansion, he sees the glass as much more than half full. He added, with the right policies, the Fed can fill it further, building on the gains so far and spreading the benefits more broadly to all Americans.

The iShares 20+ Year Treasury Bond ETF (TLT) extended its winning streak to 3-straight sessions while testing a high of $141.31. Prior and lower resistance from late October at $141-$141.50 was cleared and held.

A close above the latter keeps upside potential towards $142-$142.50 in play.

Rising support is $140.50-$140. A close below the latter and the 50-day moving average would signal a near-term top with additional risk towards $138.50-$138.

Market Analysis – The Spider S&P 500 ETF (SPY) was up for the 3rd-straight session after surging to a fresh all-time high of $314.28.

Uncharted and lower resistance at $314-$314.50 was cleared and held with a move above the latter leading to a possible run towards $315-$317.50, depending on momentum.

New support is at $313.50-$313. A close below the $312.50 level would signal a possible near-term top with backtest potential towards $311.50-$310.

RSI is in an uptrend with resistance at 75-80 and the latter representing the monthly high. A close above 80 would signal additional strength towards 85 and overbought levels from January 2018. Support is at 70-65.

The Spider S&P Retail ETF (XRT) also extended its winning streak to 3-straight sessions after tapping an intraday high of $45.08. Lower resistance from earlier this month and early April at $45-$45.25 was cleared but held.

Continued closes back above the $45.50 level would signal additional strength towards $46-$46.50. The 52-week peak from December 2018 is at $47.13.

Current support is at $44.50-$44.25. A close below the $44 level would be a renewed bearish signal with backtest pitential towards $43.50-$43 and the 50-day moving average.

RSI is in an uptrend with resistance at 60.

A close above this level would signal additional strength towards 65-70 with the latter representing the late October peak. Support is at 55-50.

Volatility Index – The S&P 500 Volatility Index ($VIX) touched a multi-month low of 11.42 in the opening minutes with fresh and upper support at 11.50-11 holding into the closing bell.

Continued closes below the latter and the 52-week low at 11.03 could lead to a test towards 10.50-10 and historically extremely oversold levels.

Lowered resistance at 12-12.50 with fluff up to 13-13.50 on a close above the latter.

We are allocating the portfolio as follows:

60% in ZIV closed on Tuesday at 70.58
40% in EDV closed on Tuesday at 138.74

All the best,
Roger Scott.