U.S. markets opened at sessions lows before battling back to finish mostly higher on Tuesday. Some of the nervousness comes ahead of the FOMC minutes and comments that were made from a couple of Fed officials.
The indexes showed strength after Director of the National Economic Council, Larry Kudlow, said that President Trump sees a good possibility a deal can be made with China.
Kudlow added Trump is open to a deal, but the sticky issues must address IP theft and tariff barriers.
The Dow gained 0.4% after testing a late day high of 24,750.
Lower resistance at 24,800-25,000 easily held with a close above 25,100 and the 50-day moving average being a more bullish signal.
The S&P 500 added 0.3% following the close at 2,682 and session peak.
Fresh and lower resistance at 2,675-2,700 was cleared and held with continued closes above the latter signaling a possible near-term bottom for the index.
The Nasdaq was up a point, or 0.01%, despite the opening backtest to 7,014.
Fresh support at 7,000-6,950 held with a close below the latter being a very bearish signal, especially with an official death cross now in play.
The Russell 2000 had its 3-session win streak snapped after sinking 0.9% on the late session pullback to 1,491.
Prior and upper support at 1,490-1,480 held on the close back below the 1,500 level.
Healthcare led sector strength after rising 1%. Consumer Staples and Utilities advanced 0.9% and 0.8%, respectively.
Materials tumbled 1.2% and was the worst performing sector while Industrials and Energy were down 0.2% to round out the laggards.
Global Economy – European markets settled mostly lower as U.K.’s departure from the European Union remained in the headlines.
Germany’s DAX 30 declined 0.4% while the Stoxx 600 Europe and UK’s FTSE 100 were lower by 0.3%. France’s CAC 40 gave back 0.2% and the Belgium20 was up 0.3%.
UK November CBI retailing reported sales rose 14 to 19, topping expectations for a print of 10.
Asian markets settled mixed after President Trump said additional tariffs on China are still likely.
Trump is expected to move ahead with an increase on tariffs to 25% on $200 billion of Chinese goods and he’s prepared to add tariffs of 10% or 25% to the final batch of $267 billion of Chinese goods if there isn’t an upcoming deal.
Australia’s S&P/ASX 200 rallied 1% and South Korea’s Kospi advanced 0.9%.
Japan’s Nikkei rose 0.6% while Hong Kong’s Hang Seng slipped 0.2%. China’s Shanghai dipped a point, or 0.04%.
China October industrial profits rose 3.6% year-over-year, the smallest increase in 7 months.
Japan October PPI services prices was up 1.3% year-over-year, stronger than expectations of 1.2%.
Redbook Store Sales up 7.9% for the year in the week ending November 24th.
U.S. chain store sales dipped 0.1% in the week ending November 24th, after rising 2% in the prior week. This was big disappointing considering it includes Black Friday shopping.
However, the 12-month pace picked up to 2.9% year-over-year versus 2.6% year-over-year. According to the report, 66% of shoppers have begun their holiday shopping, in line with last year’s 68%. The gift completion rate was slightly below 30%.
S&P Corelogic Case-Shiller home price index dipped 0.02% to 213.76 for the 20-City index after an unchanged reading at 213.80 in August. Expectations were at 213.60.
The 12-month pace slowed further to 5.15% versus 5.53%. The 10-City index was flat at 227.31 following August’s 0.04% print of 227.30. It also decelerated to 4.76% year-over-year versus 5.18%.
All 20 cities surveyed posted annual gains, led by Las Vegas’ 13.51% pace, but it was the only city in double digits for the month.
FHFA House Price Index climbed 0.2% to 266.9 in September after increasing 0.4% to 266.4 in August. It’s up 6% year-over-year.
Seven of the 9 regions surveyed posted gains on the month, led by the Mountain states (1.3%), while there was a 1.1% drop in the Pacific. For Q3, home prices rose 1.3% and are up 6.3% year-over-year from Q3 2017, with all 50 states and the District posting annual gains.
However, the report noted rising mortgage rates have cooled down housing markets as several regions and over two-thirds of states are showing slower annual gains.
November Consumer Confidence came in at 135.7, missing estimates of 136.5. All of the weakness was in the expectations component, which fell to 111 from 115.1.
The present situations index edged up to 172.7 from 171.9 while the labor differential rose to 34.4 from 32. The 12-month inflation index edged up to 4.9% from 4.8%.
Market Sentiment – Fed Vice Chairman Clarida said he supports the gradualist policy trajectory and that such a stance allows the FOMC to accumulate more information, as the Fed updates its estimates of the uncertain neutral rate.
He said that rates are much closer to the vicinity of neutral than when the Fed began hiking. He noted that rate hikes are still necessary, but he said risks have become more symmetric.
Clarida said the Fed should meet its policy objectives on a sustained basis.
He sees a robust economy and a healthy labor market, while inflation expectations are at the lower end of stability.
In a Q&A session after his remarks, Clarida said the current rate framework serves the Fed well.
He also noted that reserves are abundant and that the Fed is not going back to pre-crisis balance sheet levels. In closing, he said the balance sheet plan is very effective and well communicated.
St. Louis Fed James Bullard warned of possible cracks in growth that may shape the Fed debate in the coming year.
He argued that slower growth over the next two years will make it tougher for the Fed to continue to hike rates.
Bullard believes that policy is already at or near neutral, while he doesn’t expect low unemployment to spark inflation, with the jobs market otherwise strong with only moderate financial risks.
The iShares 20+ Year Treasury Bond ETF (TLT) traded to a high of $115.25 with resistance at $115.50-$116 easily holding.
Continued closes above the latter would signal additional strength.
Market Analysis – The Spider S&P 500 ETF (SPY) was up for the 2nd-straight session despite the opening pullback to $265.66. Lower support at $266-$265.50 held. A move below $265 would signal a near-term top with risk towards $262.50-$260 and late October lows
Near-term resistance at $268.50-$269 held on the rebound to $268.40 into the closing bell. Continued closes above the $270 would be a more bullish signal.
However, the 50-day moving average remains on track to fall below the 200-day moving average.
RSI is in a slight uptrend with resistance at 45-50. A move above this level would signal additional strength towards 55-60 and fresh monthly highs. Support is at 40.
The Real Estate Select Sector Spider (XLRE) traded higher for a 2nd-straight session after reaching a peak of $33.23. Lower resistance at $33.25-$33.50 held.
A move above the latter would be a very bullish signal for a possible run north of $34 and fresh 52-week peaks.
The 50-day moving average has leveled out following October’s downtrend and the 200-day moving average is in a nice uptrend.
Rising support is at $33-$32.75 with a move below the latter signaling additional weakness.
RSI is trying to clear resistance at 60.
A close above this level could lead to a push towards 70 and the August peak. Support is at 55-50 with a move below the latter signaling additional weakness.
Existing Position Update
Expect congestion and potentially more upside to develop over the near term.
I’m seeing increased volatility as we head into FED data towards second part of the week.
Looking at iron condor spreads on few high volatile techs.
Will update you tomorrow as usual.