U.S. markets rebounded sharply on Monday following comments over the weekend that trade talks with China were progressing well. Treasury Secretary Mnuchin and U.S. trade representative Lighthizer are leading the negotiations with Chinese President Jinping’s top economic aid Liu He to improve U.S. access to Chinese markets.

Mnuchin said he was cautiously hopeful that China will reach a deal to avoid tariffs and that provided a much needed relief rally following last week’s market selloff.

The Nasdaq zoomed 3.3% after testing an intraday high of 7,225 while easily closing back above the 7,200 level. The Dow surged 2.8% after making a steady run to 24,232 throughout the session to recapture 24,000 level.

The S&P 500 soared 2.7% after trading to a high of 2,661 to easily regain the 2,600 level.

The Russell 2000 jumped 2.2% while reaching a peak of 1,543 ahead of the closing bell.

Although the major indexes posted solid gains, the 50-day moving averages for the major indexes are starting to roll over with continued momentum needed to improve the technical setup.

Technology and Financials were the strongest sectors after rising 3.8% and 3.3%, respectively. Consumer Discretionary rallied 3% while Industrial were higher by 2.4%. There were no sector laggards.

Global Economy – European markets showed continued losses despite an early rally that had been sparked by an easing in recent trade related tensions. Germany’s DAX 30 fell 0.8% and the Stoxx Europe was down 0.7%.

France’s CAC 40 declined 0.6% while the Belgium20 and UK’s FTSE 100 gave back 0.5%.

ECB Governing Council member Weidmann said the end of net asset purchases is only the beginning of a monetary-policy normalization process that will take several years, and that’s why it’s particularly important to start soon.

He added that market expectations for the end of bond buying in 2018 and forecasts for the first interest-rate increase in the middle of 2019 are not unrealistic.

Asian markets were mixed with less volatility following Friday’s drubbing. Hong Kong’s Hang Seng and South Korea’s Kospi rallied 0.8% while Japan’s Nikkei was higher by 0.7%. China’s Shanghai stumbled 0.6% and Australia’s S&P/ASX 200 was off 0.3%.

Chicago Fed National Activity Index surged to 0.88 in February after falling to 0.02 in January. Expectations were for a reading of 0.05.

Dallas Fed Manufacturing Survey tumbled to 21.4 in March following a rise to a reading of 37.2 in February. Expectation were for a print of 30.9. A deeper look at the numbers showed the employment component slid to 10.8 from 19.1, with the workweek at 9.4 from 16.3.

New orders plunged to 8.3 from 25.3 to the lowest since November 2016. Prices were mixed with the paid index rising to 41.4 from 39.8, while prices received dropped to 18.5 from 22.5.

The 6-month outlook index slipped to 32 from 40.6, though employment and the workweek rose, while new orders growth fell. Capital expenditures also declined to 36.1 from 39.6.

Market Sentiment – New York Fed William Dudley didn’t say anything on policy and stuck to the topic of financial regulation in his comments before the U.S. Chamber of Commerce.

He said Wall Street executives’ pay can be altered to force managers to share in the costs for fines and other legal penalties against their firms and by using long-term debt as part of their compensation.

As a side note, Dudley is leaving the Fed around mid-year And reports are San Francisco Fed President John Williams is one of the leading candidates.

The iShares 20+ Year Treasury Bond ETF (TLT) fell for a second-straight session after tapping a low of $119.67 to close back below the $120 level and its 50-day moving average.

Upper support is at $119.75-$119.25 was breached with a close below $119 signaling a short-term top. Resistance is at $120-$120.50.

Market Analysis – The Russell 3000 Index ($RUA) traded up to 1,574 with lowered resistance at 1,575-1,600 holding. A close back above 1,625 and the 50-day moving average would be a slightly bullish development.

Near-term support is at 1,550-1,525 and the 200-day moving average with a move below the latter being a bearish development.

RSI is pushing near-term resistance at 45-50. Support is at 40.

The Energy Select Sector Spider (XLE) has remained in a fairly tight trading range since early February with today’s high tapping $68.07. Near-term resistance at $68-$68.50 held.

The top of the 2-month trading range is at the $69 level followed by additional hurdles at $70 and a downtrending 50-day moving average. Support is at $67.50-$67 and the 200-day moving average.

A close below $66 and the bottom of the trading range would be a bearish development.

RSI cleared resistance at 50 and late January support with continued closes above this level leading to a possible run towards 60. Support is at 40 if 50 fails.

Existing Position Update

BABA is showing strength and I’m expecting more upside in the next few sessions.

TSLA appears to be “pricing in” most factors. Technically, I’m seeing a bottom in the near term. I expect price to fall back into the mid channel safety zone over the next few sessions, if price continues to move higher.

FB did a complete 180 today and actually closed higher. Today’s technical trading levels appear to be a classic shakeout reversal.

I’m going to give the stock some time – since technically it’s under valued and we can expect a bit more upside, which will put us at above our safety zone.

I will update you tomorrow and if FB is lacking behind the overall market, we will roll it over.

All the best,

Roger Scott