U.S. markets rallied on Tuesday following fresh trade optimism with China and ahead of the FOMC’s latest decision concerning interest rates on Wednesday.
President Trump tweeted that he had a very good conversation with President Xi of China with an extended meeting planned for next week at the G-20 in Japan.
The higher highs cleared near-term and major resistance levels with volatility falling below major support levels.
The action looks bullish for a continued rally towards all-time highs, depending on Fed speak or what happens with interest rates, with any disappointment news setting the stage for a nasty selloff.
The Nasdaq soared 1.4% following the spike to 8,005 shortly after the opening bell.
Prior and upper resistance at 7,950-8,000 was cleared but held on the close back above the former and the 50-day moving average.
The Dow was also up 1.4% after testing a first half high of 26,527.
Current and upper resistance at 26,250-26,500 was challenged but held on the close above the former and the index less than 2% away from all-time highs.
The Russell 2000 surged 1.1% following the intraday run to 1,560.
Upper resistance from mid-May at 1,545-1,560 was tapped but held with the close above the 200/50-day moving averages getting 1,575-1,590 in play.
The S&P 500 soared 1% after reaching a morning peak of 2,930 while closing above the 2,900 level for the first time since early May.
Fresh and lower resistance at 2,925-2,950 was tripped but held with the all-time high at 2,954.
Industrials and Technology were sector leaders after jumping 1.9% and 1.8%, respectively.
Energy and Financials gained 1.4% and 1.3%.
Consumer Staples was the leading sector laggard after falling 0.5% while Utilities and Real Estate were lower by 0.4% and 0.3%, respectively.
Housing Starts fell 0.9% to 1,269,000 in May, topping forecasts of 1,240,000, but below April’s print of 1,281,000.
Single family starts declined 6.4% versus the prior 5.2% gain while multifamily starts were up 10.9% after jumping 10.7% in April.
Building permits rose 0.3% to 1,294,000 following the prior 0.2% gain to 1,290,000 million.
Overall, the big revisions to prior months overshadow the May decline and leave housing starts on better-than-expected footing overall.
Chain store sales climbed 2.7% in the week ending June 15th, and follows the 1.4% rebound the prior week. The 5.1% cumulative advance nearly reversed the 5.4% drop in the June 1st period.
The 12-month pace accelerated to a 3.1% year-over-year clip versus 1.8% previously. Strength in dollar stores led the gains on the year-over-year basis, with support from discounters, wholesale clubs, building supply, and non-apparel specialty stores.
Redbook Store Sales up 5.4% for the year in the week ending June 15th.
Market Sentiment- The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 6th-straight session after reaching a fresh 52-week and intraday peak of $132.86.
New and lower resistance at $132.50-$133 was cleared but held with additional hurdles at $134.50-$135.
Rising support is at $132-$131.50 with a close below $131 signaling a possible near-term top.
RSI remains in a solid uptrend but is signaling slightly overbought levels after clearing resistance at 70.
There is a chance for a run towards 75-80 on continued strength with the latter representing the late May high. Support is at 65-60.
Market Analysis – The Russell 3000 Index ($RUA) snapped out of a 6-session grading range after tapping an intraday high of 1,724. Fresh and lower resistance from mid-April at 1,725-1,750 was challenged but held with the late April and all-time peak at 1,743.
Rising support is at 1,700-1,675.
A close below the latter and the 50-day moving average would signal a false breakout with further risk towards 1,650-1,625 and the 200-day moving average.
RSI is back in an uptrend with fresh hurdles at 65-70 and the latter representing the high throughout April.
Support is at 60-55 with a close below 50 being a bearish development and signaling additional weakness.
The Real Estate Select Sector Spider (XLRE) had its 5-session winning streak snapped despite testing a new all-time intraday high of $38.49.
Blue-sky and lower resistance at $38.50-$39 was nearly cleared with upside potential towards $39.50-$40 on renewed momentum.
Rising support is at $37.75-$37.25. A close back below the latter opens up risk towards $37-$36.50 and the 50-day moving average along with signaling a near-term top.
RSI is in a slight downtrend after failing resistance at 70.
Continued closes above this level would signal additional strength towards the 75 area and early March highs. Support is at 65-60 with a close below the latter being a bearish development for additional weakness.
Volatility Index – The S&P 500 Volatility Index ($VIX) tested a morning low of 14.62 with lower support at 15.25-14.75 getting breached but holding.
The close below the former and the 50-day moving average was a slightly bullish signal.
The midday bounce to 15.54 easily held lower resistance at 16.50-17.
We are allocating the portfolio as follows:
60% in ZIV closed on Tuesday at 73.07
40% in EDV closed on Tuesday at 127.23
All the best,
Roger Scott.