U.S. markets rebounded on Friday on news White House officials are planning a final trade deal with China ahead of the summit between President Donald Trump and Chinese leader Xi Jinping in the coming weeks. Economic news was weak but was offset by lower volatility on the higher market highs.

The gains helped the major indexes recover losses from earlier in the week but it wasn’t enough to extend the Dow’s weekly winning streak which ended at 9, as did the Russell 2000.

The Nasdaq, however, was up for the 10th-straight week with the S&P recovering the 2,800 level for the first time since early November.

The Russell 2000 was higher by 0.8% after reaching a late session peak of 1,590.

Fresh and lower resistance at 1,590-1,600 was tested but held on the close back above the 200-day moving average.

The Nasdaq was up 0.8% following the late session push to 7,603.

Major resistance from earlier in the week and early November at 7,600 was breached but held with upside potential towards 7,650-7,700 on continued closes above this level.

Tech rallied 0.9% for the week while the small-caps were lower by a half-point.

The S&P 500 rose 0.7% following the late day run to 2,808.

Lower resistance from early November at 2,800-2,825 was cleared and held with a move above the latter being a continuing bullish signal.

The Dow climbed 0.4% after trading to a high of 26,143. The close back above the 26,000 keeps current resistance at 26,250-26,500 in play.

For the week, the S&P 500 gained 0.4% while the Dow shed 5 points.

Energy led sector strength after zooming 1.8%.

Healthcare surged 1.4% while Consumer Discretionary and Communication Services were up 0.8%.

Consumer Staples dipped 0.2% to pace sector weakness while Materials and Real Estate slipped 0.1%.

Energy was higher by 1.1% for the week with Technology and Financials rising 0.9% and 0.8%, respectively. Materials and Real Estate were hit with losses of 1.4% and 1.2%, respectively.


No update this week.

Global Economy – European markets were higher across the board despite slightly disappointing economic news from the eurozone.

The Belgium20 jumped 1.1% and Germany’s DAX 30 rallied 0.8%. UK’s FTSE 100 and France’s CAC 40 rose 0.5% while the Stoxx 600 Europe was up 0.4%

Eurozone February consumer inflation hit 1.5% last month, up from a previous 1.4% reading in January.

Core inflation, excluding food and energy, stood at 1.2%, well short of the ECB’s target of close to but below 2%.

Asian markets settled mostly higher following slightly upbeat manufacturing figures from China.

China’s Shanghai surged 1.8% and Japan’s Nikkei jumped 1%. Hong Kong’s Hang Seng added 0.6% and Australia’s S&P/ASX 200 was up 0.4%. South Korea’s Kospi was closed for a holiday.

Caixin China manufacturing purchasing managers’ index rose to 49.9 in February from 48.3 in January.

Despite the surprise rebound, the index has stayed below 50, the mark that separates expansion from contraction, for three straight months

Personal Income and Outlays slipped 0.1% in January versus expectations for a gain of 0.3% for the month. Wages and salaries increased 0.3% in January, after a 0.5% December gain, with disposable income dipping 0.2% in January and rising 1.1% in December.

The December savings rate jumped to 7.6%, the strongest since January 2016, versus 6.1% in November. The December PCE chain price index was up 0.1% versus November’s unchanged print with the core rate up 0.2%, the same as in November.

PMI Manufacturing Index dropped 1.9 points to 53 in February, matching estimates and representing the lowest reading since August 2017. New orders declined to 52.7 versus 55.6 and is the lowest since June 2017.

According to the report, firms noted a “marked easing in production growth” with subdued expectations for future growth suggesting downside risks for coming months.

ISM Manufacturing Index fell 2.4 points to 54.2 in February, weaker than expectations of 55. Declines were broadbased. The employment component declined 3.2 points to 52.3 from 55.5.

New orders fell back 2.7 ticks to 55.5 from 58.2. Supplier deliveries were down 1.3 points to 54.9 from 56.2. Inventories edged up to 53.4 from 52.8. New export orders rose a point to 52.8 from 51.8, with imports up 1.5 points to 55.3 from 53.8.

Prices paid dipped to 49.4 from 49.6.

Consumer Sentiment rose 2.6 points to 93.8 in the final February print, well below forecasts of 95.7. The current conditions index dipped to 108.5 versus January’s 108.8.

The expectations index rose to 84.4 from 79.9 to start the year. The 12-month inflation gauge slipped to 2.6% from 2.7% previously and the 5-year price index dropped to 2.3% from 2.6%.

Baker-Hughes Rig Count reported that the U.S. rig count was down 9 rigs from last week to 1,038 rigs, with oil rigs down 10 to 843 and gas rigs up 1 to 195.

The U.S. Rig Count is up 57 rigs from last year’s count of 981, with oil rigs up 43 and gas rigs up 14. The U.S. Offshore Rig Count is up 3 rigs to 22 and up 8 rigs year-over-year.

Market Sentiment – Atlanta Fed Raphael Bostic is still expecting one more tightening this year. He said this year’s data releases have been pretty weak so far, but he’s not sure that trend will last.

He expects inflation to pick up. However, he is worried the FOMC’s inflation target is being viewed as a ceiling.

On the balance sheet, Bostic said there is no clear assessment on what the right level of reserves is, as noted by Powell who suggested about $1 trillion plus a buffer.

Bostic does not have a strong view on the portfolio and whether it should be Treasuries or a combination of Treasuries and MBS.

The iShares 20+ Year Treasury Bond ETF (TLT) extended its losing streak to 3-straight sessions after tapping a low of $118.64. Fresh and upper support at $118.50-$118 held.

A close below the latter gets early December support levels at $117.50-$117 and the 50-day moving average in play.

Near-term and lowered resistance is at $119-$119.50 with more important hurdles at $120.50-$121 and the 200-day moving average.

RSI is in a downtrend and signaling slightly oversold levels with support at 35-30. A close below the latter opens up risk towards 25-20 and October lows. Resistance is at 40.

Market Analysis – The Russell 2000 ETF (IWM) rebounded to test a high of $158.34. Prior resistance is at $158.50-$159 held with last’s Monday’s peak at $159.50.

Continued closes above the $160 level and early October support would be a more bullish signal for higher highs.

Near-term support is at $157.25-$156.75. A close below the latter opens up risk towards $155-$152.50 and previous support levels from early February.

RSI is back in a slight uptrend with resistance at 75.

A move above this level would be a bullish signal for a possible run towards 80-85 and September 2017 peaks. Support is at 65-60.

The Materials Select Sector (XLB) fell for the 4th-straight session following the pullback to $54.79.

Mid-February support at $54.50-$54 held with a close below the latter getting $53-$52.50 and the 50-day moving average in play.

Lowered and near-term resistance is at $55.50-$56 and the 200-day moving average.

Continued closes back above the latter would signal a possible return of momentum for a run towards $57-$57.50.

RSI is in a downtrend with support at 55-50 with the latter holding since early January. A close below this level would be a bearish signal for a continued backtest towards 45-40. Resistance is at 60.

The percentage of Nasdaq 100 stocks trading above the 200-day moving average closed Friday at 63.10% with the session high reaching 64.07%.

Lower resistance from early February at 62.50%-65% held. A move above the latter would be a bullish development and signal additional strength towards 67.50%-70%.

August resistance levels are in the 70%-72.5% range. Current support is at 62.50%-60% with a move below the latter being a slightly bearish signal for additional weakness.

The percentage of S&P 500 stocks trading above the 50-day moving average settled at 89.88% with the session high at 91.46%. Lower March and April 2016 resistance remains at 92.50%-95% with overbought levels still in play.

Current support is at 87.50%-85% and consolidation levels that have been in the mix for 12-straight sessions.

A move below the latter would be a bearish signal for additional weakness towards the 82.50%-80% area.

Existing Position Update

Liquidated TSLA and initiated another TSLA spread.

It’s all about flexibility.

I’m looking at iron condor for this trade if conditions are ripe.

Put/Call ratio is remains slightly bearish

Expect two sided market action next few sessions.

Roger Scott.