U.S. markets remained strong and in rebound mode after extending their winning streak to 5-straight sessions. Today’s gains were a continued bullish sign as the major indexes cleared their 50-day moving averages, for the most part.

This follows Wednesday’s battle fighting to get back into positive territory for the year with the small-caps rejoining the major indexes following today’s gains.

The Nasdaq once again led the way higher after soaring 1.6% after closing a half-point of its late session high of 7,256 while easily clearing and holding its 50-day moving average.

The S&P 500 rose 1.2% after racing to a late session high of 2,731 while closing above the 2,700 level for the first time in 9 sessions. The Dow also advanced 1.2% after reaching an intraday peak of 25,203.

Both indexes held their 50-day moving averages by 8 and 50 points, respectively.

The Russell 2000 gained 1% after testing a high of 1,537 while falling 10 points shy of its 50-day moving average. The index is back in positive territory by 2 points for 2018.

Utilities showed the most strength with the sector surging 2% while Technology and Consumer Staples jumped 1.7% and 1.5%, respectively. Energy was the only sector to finish in the red after giving back 0.4%.

Global Economy – European markets showed continued strength with France’s CAC 40 leading the way higher after rising 1.1% followed by the Belgium20 which climbed 0.5%. UK’s FTSE 100 advanced and the Stoxx Europe 600 popped 0.3% while Germany’s DAX 30 was up 0.1%.

Eurozone Jan new car registrations rose 7.1% year-over-year to 1,253,877.

Asian markets were higher in limited action as South Korea’s Kospi and China’s Shanghai were closed for holidays. Hong Kong’s Hang Seng surged 2% and Japan’s Nikkei jumped 1.5% while Australia’s S&P/ASX 200 was up 1.2%.

Japan December core machine orders fell 11.9% month-over-month, weaker than expectations for a drop of 2%.

Japan may nominate two reflationists to BoJ board according to late day reports. Waseda University professor Wakatabe, along with BoJ Executive Director Amamiya, could be promoted to deputy governor roles.

Wakatabe is known for advocating bolder monetary easing and Amamiya has worked closely with Kuroda. The moves might accompany the reappointment of Kuroda as BoJ governor.

Initial jobless claims rose 7,000 to 230,000 in the week ended February 10th, matching forecasts. The 4-week moving average came in at 228,500 while continuing claims increased 15,000 to 1,942,000 in the February 3rd week.

U.S. Philly Fed manufacturing index rose 3.6 points to 25.8 in February, better than the expected dip to 22. The employment component climbed to 25.2 from 16.8, though the workweek slid to 13.7 from 16.7.

New orders surged to 24.5 from 10.1. Prices paid rose to 45.0 from 32.9, but prices received dippeded to 23.9 from 25.1. The 6-month general business index edged down to 41.2 from 42.2, with employment at 40.4 from 34.9, new orders at 49.1 from 46.2, prices paid at 65.2 from 54.2, and capital expenditures at 40.4 from 36.2.

The rise in the prices paid component could add to the markets’ fear of rising inflation.

The Business Outlook Survey General Conditions Index came in at 25.8 versus forecasts for a print of 21.

U.S. PPI rose 0.4% in January on both the headline and the core, and ahead of expectations for PPI to rise 0.3%, with a 0.2% core price gain. On a 12-month basis, PPI accelerated to 2.7% year-over-year versus 2.6%, while the core slowed to 2.2% versus 2.3%.

Goods prices rose 0.7%, with the 3.4% increase in energy more than offsetting the 0.2% dip in food prices. Services prices increased 0.3%.

U.S. January Industrial Production Capacity Utilization Rate fell 0.1% in January with capacity at 77.5%, disappointing expectations for a rise to 78%.

The Empire State Manufacturing Survey came in at 13.1 and below forecasts of 17.5.

NAHB housing market index was unchanged at 72 for February and a point below expectations.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) traded higher throughout the session while peaking at an intraday high of $118.79.

Lowered resistance at $118.75-$119 held with a close above the latter being a slightly bullish development. Support is at $118-$117.50 with continued risk to $116.50-$116 and fresh 52-week lows on a move back below the latter.

Market Analysis – The PowerShares QQQ (QQQ) zoomed 1.9% after trading higher for the 5th-straight session while reaching an intraday peak of $165.70.

Resistance at $165.50-$166 was split with continued closes above the latter leading to a possible push towards $167.50-$170. Today’s follow through on Wednesday’s close back above the 50-day moving average was a continued bullish signal.

Rising support is at $165-$164.50 with risk to $162.50 on another move below the latter.

RSI is back in a nice trend after clearing resistance at the 50 level and looks posies to make a run at 70 on continued strength.

The Financial Select Sector Spiders (XLF) traded up to $29.14 shortly after the open to clear lower resistance at $29-$29.25. We mentioned in mid-January there was breakout potential to $30.50-$31 and levels that would be back in play on continued strength.

Near-term support is at $28.75-$28.50 and the recently cleared 50-day moving average.

RSI will be trying to hold November support at 50 ahead of a 3-day weekend with resistance at 70-75 on continued closes above this level. The market is closed Monday for a holiday.

Existing Position Update

TSLA set to expire tomorrow – price is within zone of safety. I’m looking at initiating another TSLA spread before the end of the week.

NFLX remains below our resistance level and the bear call spread is set to expire as well. If I see more upside I will adjust the position as we head into expiration day.

SPY position is moving back into profit zone and with expiration some time from now – we get more opportunity to ride the bounce back to the upside. The challenge with SPY right now is breaking above the 50 day line….keep your eye on the SPY and the simple moving average. We need to see a strong break above that level.

Roger Scott