U.S. markets opened at fresh record highs to start Monday’s action amid increasing optimism on trade. Commerce Secretary Wilbur Ross reiterated over the weekend that good progress was being made on a phase one deal with China and also suggested the U.S may not need to impose EU auto tariffs.
The Nasdaq was up for the 3rd time in 4 sessions after rising 0.6% while trading to an intraday high of 8,451. Fresh and lower resistance at 8,450-8,500 was cleared but held with additional hurdles at 8,600-8,650 on a close above the latter.
The Russell 2000 also gained 0.6% with the session peak reaching 1,602. Fresh and lower resistance at 1,600-1,615 was cleared but held with a close above the latter and the May 52-week high at 1,618 getting 1,625-1,640 in play.
The Dow rose 0.4% after testing an all-time intraday high of 27,517. New and lower resistance at 27,500-27,750 was cleared but held with a close above the latter signaling a possible run towards the 28,000 level.
The S&P 500 was also higher by 0.4% following the record run to 3,085 shortly after the opening bell. Fresh and lower resistance at 3,075-3,100 was cleared and held with melt-up potential towards 3,125-3,150 on a move above the latter.
Energy was the strongest sector after zooming 3.3% while Industrials and Financials added 1.2% and 0.9%, respectively. Utilities and Real Estate were the weakest sectors for the 2nd-straight session after giving back 1.3% and 1.1%, respectively.
Factory Orders dropped -0.6% in September, missing forecasts for a rise of 0.3%, and follows the -0.1% dip in August. Transportation orders dropped -2.8% following the 0.2% August gain.
Excluding transportation, factory orders slipped -0.1% versus -0.2% previously. Nondefense capital goods orders excluding aircraft declined -0.6% versus -0.8% previously.
Shipments fell -0.2% versus -0.3% previously, with nondefense capital goods shipments excluding aircraft -0.7% lower versus August’s -0.7%. Inventories rose 0.3% versus -0.1%.
The inventory-shipment ratio was steady at 1.39.
TD Ameritrade IMX Level for October was at 4.84.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) fell for the 2nd-straight session after testing an intraday low of $138.53. Prior and upper support at $138.50-$138 was challenged but held.
A close below the latter would be a ongoing bearish development with additional weakness towards $137-$136.50.
Lowered resistance is $139.50-$140 followed by $141.50-$142 and the 50-day moving average.
Market Analysis – The Spider Small-Cap 600 ETF (SLY) extended its winning streak to 2-straight sessions after surging to an intraday high of $70.41. Early May and late February resistance at $70.50-$71 was challenged but held.
A close above the latter would signal a quadruple-top breakout with upside potentials towards $72-$72.50 and fresh 52-week peaks.
Near-term support has moved up to $70-$69.50. A close below the latter would signal a false breakout with backtest potential towards $68.50-$68.
RSI is back in an uptrend after clearing lower resistance at 65-70.
A move above the latter gets 75-80 and February highs in play. Support is at 60 with a move below this level signaling additional weakness towards 55-50.
The Communication Services Select Sector Spider (XLC) was up for the 4th-straight session following the intraday push to $51.31. Near-term and lower resistance at $51.25-$51.50 was cleared but held.
A move above the latter would be a bullish signal for a push towards $52-$52.50 with the current July all-time high at $51.87.
Current support is at $51-$50.75.
A close below the $50.50 level would be a slightly bearish signal for a retest towards $50.25-$50 and the 50-day moving average.
RSI is in an uptrend with resistance at 60.
A close above this level would be a bullish signal for additional strength towards 65-70 and July highs. Support is at 55-50 with the latter holding since mid-October.
Volatility Index – The S&P 500 Volatility Index ($VIX) stayed elevated throughout the session
while testing a morning high of 13.13.
Lower resistance at 13-13.50 was breached but held with the latter holding for the 7th-straight session. A close above the 13.50 level would be a cautious signal with risk towards 14.50-15.
Support is 12.50-12 with weakness towards 11.50-11 on a move below the latter.
We are allocating the portfolio as follows:
50% in ZIV closed on Monday at 69.29
50% in EDV closed on Monday at 135.63
All the best,
Roger Scott.