U.S. markets opened in positive territory on Monday while trading mostly higher throughout the session ahead of the busiest week of the 2Q earnings season.
The blue-chips and small-caps experienced some choppiness afterwards but settled higher along with the overall market.
Geopolitical tensions and trade talks remain in focus but volatility eased while closing just outside a key support level.
Fedspeak will ease this week during a quiet period and ahead of next week’s decision on interest rates.
The Nasdaq rallied 0.7% after testing a high of 8,218 ahead of the closing bell.
Current and lower resistance at 8,200-8,275 was cleared and held with the recent all-time high at 8,264.
The S&P 500 was up 0.3% following the afternoon run to 2,990.
Prior and lower resistance at 3,000-3,025 held for the 3rd-straight session with the record high from earlier this month at 3,017.
The Dow edged up 0.1% following the opening push to 27,227.
Prior and lower resistance at 27,250-27,500 held with last Tuesday’s record high at 27,398. A close below the 27,00 level would be a slightly bearish signal with Monday’s intraday low tapping 27,088.
The Russell 2000 gave back 0.2% after trading in an 11-point range while closing a point off its session low of to 1,543.
The fresh monthly session low held crucial support at 1,540-1,535 and the 50-day moving average.
Technology showed the most sector strength after soaring 1.2% while Real Energy and Communication Services advanced of 0.4%. Consumer Staples were the weakest sector after falling -0.6% while Materials, Healthcare and Utilities declined -0.2%.
Chicago Fed National Activity Index ticked up 0.01 points to -0.02 in June, missing forecasts for a flat reading.
The index has been in negative territory since November with the 3-month moving average inching up to -0.26 versus -0.27.
Forty of the 85 indicators made positive contributions, while 45 had negative impacts.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) held positive territory throughout the session while reaching an intraday peak of $132.49. Prior and lower resistance at $132-$132.50 was cleared but held.
A close above the latter would be an ongoing bullish signal with additional hurdles at $133.50-$134.
Current support is at $131.50-$131.
A move below the latter would be a slightly bearish signal with risk towards $130.50-$130 and the 50-day moving average.
Market Analysis – The Spider Small-Cap 600 ETF (SLY) fell for the 3rd time in 4 sessions after tapping a fresh monthly low of $66.57. Near-term and upper support at $66.50-$66 held.
A close below the latter and the 50/200-day moving averages would signal additional risk towards $65.50 and late June support.
Current and lower resistance at $67-$67.50 was challenged but held on the intraday rebound to $67.16.
Continued closes above the $68 level would be a more bullish signal a near-term bottom is in.
RSI remains in a slight downtrend after failing upper support at 50-45.
A move below the latter would be an ongoing bearish development with additional weakness towards the 40 area and early June support. Resistance is at 55-60.
The Health Care Select Sector Spider (XLV) closed lower for the 2nd-straight session following the intraday pullback to $91.49. Near-term and upper support at $91.50-$91 was tripped but held.
A close below $90.50 and the 50-day moving average would signal additional weakness towards $90-$89.50 and the 200-day moving average.
Lowered resistance is at $92-$92.50.
Continued closes above $93 would be a more bullish signal for renewed strength. The 50-day moving average cleared the 200-day moving average earlier this month to form a golden cross. This is typically a bullish signal for higher highs.
RSI is trying to level out with support at 45-40.
A close below the latter and late May support would signal additional weakness towards 35-30. Resistance is at 50-55.
Volatility Index – The S&P 500 Volatility Index ($VIX) bubbled to a high of 14.70 during the first half of action and just missed clearing the monthly peak at 14.71.
Near-term and lower resistance at 14.50-15 held for the 3rd-straight session. A close above 15-15.50 and the 50-day moving average would be a bearish development for the market.
Upper support at 13.50-13 was cleared but held on the fade to 13.42 afterwards.
This was a slightly positive development for the market but a close below the 12.50 level would be a more bullish signal volatility has eased.
We are allocating the portfolio as follows:
50% in ZIV closed on Monday at 74.24
50% in EDV closed on Monday at 125.92
All the best,
Roger Scott.