U.S. markets showed momentum throughout much of Wednesday’s action as the major indexes held their gains after President Trump said trade talks with China by phone were moving along very well. While this remains a major headwind, the market responded well as it could be anticipating a deal sooner rather than later.
Although there was a slight fade into the closing bell, a near-term bottom could be in progress as the small-caps led the move higher. Volatility remains a wild card but is trending lower with major support back in play. The Russell 2000 rallied 1.1% after trading to an intraday peak of 1,471.
Near-term resistance at 1,465-1,480 was split but held with a close above the latter being a slightly bullish signal. The Nasdaq advanced 1% following the midday run to 7,197.
Fresh resistance at 7,150-7,200 held with continued closes above the latter signaling a possible near-term bottom. The Dow gained 0.6% after trading reaching an afternoon peak of 24,828.
Near-term and lower resistance at 24,800-25,000 was cleared but failed to hold with a close above the latter and the 200-day moving average being a bullish development.
The S&P 500 was up 0.5% following the second half push to 2,685. Lower resistance at 2,675-2,700 was cleared but failed to hold with continued closes above the latter signaling additional momentum. Consumer Discretionary and Communication Services were higher by 1.1% to lead sector strength. Materials and Healthcare rose 0.9%.
Real Estate and Utilities led sector laggards after falling 1.9% and 0.6%, respectively.
Consumer Staples slipped 0.1%.
Global Economy – European markets closed higher despite Brexit concerns ahead of a no confidence vote for UK Prime Minister May in her leadership of the Conservative Party.
May said a leadership challenge would delay Brexit, or even risk it being canceled altogether, as she survived the vote after the markets closed. France’s CAC 40 zoomed 2.2% and the Belgium20 soared 2%. The Stoxx 600 Europe jumped 1.7% and Germany’s DAX 30 rallied 1.4%. UK’s FTSE 100 advanced 1.1%.
Eurozone October industrial production rose 0.2% month-over-month and 1.2% year-over-year, above estimates of 0.1% and 0.7%, respectively.
Asian markets were ended higher on speculation progress was being made for a resolution to the U.S-China trade conflict. Japan’s Nikkei surged 2.2% and Hong Kong’s Hang Seng was higher by 1.6%. South Korea’s Kospi and Australia’s S&P/ASX 200 jumped 1.4% while China’s Shanghai added 0.3%.
Japan October core machine orders rose 7.6% month-over-month and 4.5% year-over-year, missing expectations of 9.7% and 5%, respectively.
October Japan tertiary industry index rose 1.9%, easily topping estimates of 0.8%. Japan November PPI oslipped 0.3% month-over-month and was up 2.3% year-over-year, missing forecasts for a dip of of 0.1% and gain of 2.4%, respectively. U.S. Economy MBA Mortgage Applications rose 1.6%, along with a 2.5% gain in the purchase index, and a 1.8% rise in the refinancing index. The average 30-year fixed mortgage rate fell below the 5% level, plunging 12 basis points to 4.96%, the lowest level since September. November Consumer Price Index was flat with the core rate edging up 0.2%, as forecast.
There were no revisions to October’s respective gains of 0.3% and 0.2%. The headline 12-month pace slowed to 2.2% year-over-year from 2.5%, with the ex-food and energy component edging up to 2.2% from 2.1%. Energy costs declined 2.2%, almost erasing the 2.4% jump previously.
Housing prices were up 0.3%, with the owners’ equivalent rent gauge up 0.3% as well, matching October’s gains. Services prices rose 0.2% from 0.3%. Food and beverage costs were 0.2% higher as well, from -0.1%. Transportation costs dipped 0.8% versus the prior 1.1% gain. Apparel was down 0.9% from 0.1%.
Medical care costs increased 0.4% from 0.2%. Recreation bounced 0.4% from -0.1%. Education dropped 0.5% from -0.1%.
Real average weekly earnings decelerate to a 0.5% year-over-year clip versus 0.8%. Atlantic Fed Business Inflation Expectations was up 2.3% for the year.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd-straight sessions following the backtest to $118.24. Fresh and upper support at $118.50-$118 was breached and failed to hold. A close below the latter would signal a possible near-term top.
Resistance remains at $119-$119.50.
Market Analysis – The Spider Small-Cap 600 ETF (SLY) closed higher for the first time in 6 sessions after making a run to $65.37. Near-term resistance at $65-$65.50 was split but held with continued closes above $66 being a slightly bullish signal.
However, last week’s failure at the 50-day moving average remains a bearish signal until cleared and held. Shaky support is at $64-$63.50. A close below the latter would likely signal additional selling pressure with risk towards $62.50-$62 and February lows.
RSI is in a slight uptrend with resistance at 40. Continued closes above this level would signal additional strength towards 45-50.
Support is at 35-30.
The Energy Select Sector Spider (XLE) was up for the 2nd-straight session following a previous 4-session slide with the high tapping $64.55. Fresh and lowered resistance at $64.50-$65 held. Continued closes back above $66 would be a slightly bullish development and signal a possible short-term bottom.
Current support is at $63.50-$63 with a close below the latter getting $62-$61.50 and new 52-week lows in play. The death-cross that formed last month with the 50-day moving average falling below the 200-day moving average remains a bearish development.
RSI is back in a slight uptrend with resistance at 40.
Continued closes above this level would signal additional momentum towards 45-50. Support is at 35-30.
May take partial profit next few session.
Looking for more upside before initiating bear call spreads.
I believe some stagnation will move into the market next few weeks.
Will give us opportunity for iron condor.