U.S. markets showed strength to close out a shortened week while finishing higher over the four sessions and ahead of Good Friday. It also marked the last trading day for the month and quarter which most fund managers were probably glad to see.
April is historically a bullish month for the market with the Dow typically showing the most strength. However, the technical outlook remains rocky with 1Q earnings season fast approaching and a number of headwinds facing the U.S. and global markets going forward.
The Nasdaq surged 1.6% after trading to an intraday high of 7,120 to regain the 7,000 level but remains below its 100-day moving average. For the quarter, Tech was up 2.3%, and year-to-date.
The S&P 500 surged 1.4% after tapping a high of 2,659 but remains roughly 2% below its 100-day moving average. For the quarter, the index was down 1.2%.
The Russell 2000 rallied 1.2% after racing to a high of 1,540 to clear its 100-day moving average but a level that failed to hold into the close. The index was down 6 points, or 0.4% for the quarter.
The Dow jumped 1.1% to regain the 24,000 level while trading to an intraday high of 24,314. The index fell 2.3% for the first-quarter.
Energy and Technology led sector strength after rising 2.1% and 2%, respectively. Real Estate were the only sector laggard after slipping 0.03%.
For the past 5 sessions, Utilities and Real Estate are up 1.5% and 1.4% while Consumer Staples are higher by 0.7% and are the only sectors showing gains.
On the flip side, Technology and Financials are down 5.4% and 5.3%, respectively, to lead sector laggards.
Consumer Discretionary is up 0.6% and is the only sector showing a gain over the past 3 months. Energy and Consumer Staples have fallen 8.9% and 8.1% while Materials have sank 7.9% to lead sector laggards over the same time frame.
Global Economy – European markets showed continued strength ahead of a long weekend as they are closed Friday and Monday for the holiday weekend.
Germany’s DAX 30 soared 1.3% and France’s CAC 40 was up 0.7%. The Stoxx Europe gained 0.4% while UK’s FTSE 100 added 0.2%. The Belgium20 climbed 0.1%.
The German March unemployment change fell 19,000 to 2,373,000, better than expectations for a decline of 15,000. The March unemployment rate fell 0.1% to a record low of 5.3%, matching forecasts.
UK March GfK consumer confidence rose 3 to a 10-month high of -7, stronger than expectations of no change at -10.
Asian markets rebounded to settle mostly higher. China’s Shanghai was higher by 1.2% while South Korea’s Kospi was up 0.7%. Japan’s Nikkei rose 0.6% and Hong Kong’s Hang Seng advanced 0.2%. Australia’s S&P/ASX 200 gave back 0.5%.
Jobless Claims fell 12,000 to 215,000 in the week ending March 24th, missing forecasts of 228,000.
February Personal Income and Outlays gains of 0.4% for income and 0.2% for consumption matched forecasts.
Chicago PMI for March dropped another 4.5 points to 57.4.
Bloomberg Consumer Comfort Index slipped to 55.6 for March from a 56.7 cycle-high in February.
Consumer Sentiment showed a final March print of 101.4, which was up from February’s 99.7 but down a bit from the preliminary March reading of 102.
Baker Hughes reported the U.S. rig count was down 2 rigs from last week to 993, with oil rigs down 7 to 797, gas rigs up 4 to 194 and miscellaneous rigs up 1 to 2. The U.S. Rig Count is up 169 rigs from last year’s count of 824, with oil rigs up 135, gas rigs up 34 and miscellaneous rigs unchanged at 2. The U.S. Offshore Rig Count is down 1 to 12 rigs and down 10 rigs from last year’s count of 22.
Atlanta Fed’s Q1 GDPNow estimate rebounded to 2.4%. up from last week’s 1.8% estimate, edging closer to the 2.5% Blue Chip Economist median.
Market Sentiment – Philadelphia Fed President Harker expects two more rate hikes this year, and he noted he revised to three tightenings in 2018, versus his prior estimate of only two.
He explained it was the firming in inflation that caused him to revise his rate projection. He expects inflation to reach and exceed the 2% target by the end of 2019 and thinks the jobless rate can fall to as low as the 3.5% range next year.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the third-straight session after trading to a high of $122.29.
Fresh resistance at $122-$122.50 and the 100-day moving average held with a close above $123 and the 200-day moving average being a very bullish development. Rising support is at $121.50-$121.
RSI is pushing multi-month resistance at 65 with continued closes above this level signaling additional strength. Support is at 60.
Market Analysis – The Spider S&P 500 ETF (SPY) traded higher for just the second time in seven session after reaching a late day peak of $265.26.
Near-term resistance at $265-$265.50 held with additional hurdles at $267-$267.50. Support is at $262.50-$262 with a close below $260 being a slightly bearish development.
RSI is back in an uptrend with resistance at 50.
Continued closes above this level would be a bullish signal for a possible push towards 60 and February/ March highs. Support is at 40-35.
The Industrials Select Sector Spider (XLI) was up for just the second time over the past six sessions after making a run to $74.85. Lower resistance at $75-$75.50 held with additional hurdles at $76-76.50 and a downward sloping 50-day moving average.
Near-term support at $74-$73.50 held with a close below $73 being a bearish signal.
RSI is approaching short-term resistance at 50 with continued closes above this level leading to a possible test towards 60. Support is at 40.
Existing Position Update
BABA puts show decay since we initiated the position. With implied volatility moving away from the puts and back into the calls – we can expect quicker decay over the next few sessions.
TSLA began showing signs of upside after bottoming out during the first half of the session.
I’m going to roll into FB but not till I get confirmation that markets are ready to move higher, since price is grossly under valued and the stock is starting to attract value investors – which is the same scenario that TSLA happens to fall in as well.
Roger Scott