U.S. markets finished mostly higher on Thursday while showing overall strength for a fifth-straight session. The late session rally held despite the signing of the declaration of a 25% tariff on imported steel and a 10% tariff on imported aluminum.
The market took it as a good sign as Canada and Mexico are being exempt, for now from the tariffs, while NAFTA negotiations are ongoing.
The S&P 500 gained 0.5% after testing a high of 2,740 while closing less than a point below its 50-day moving average. The Dow was up 0.4%, after trading to a high of 24,950 with near-term resistance at 25,000 holding.
The Nasdaq advanced 0.4% after making a run to 7,435 while clearing and holding the 7,400 level for the first time since late January. The Russell 2000 dipped 0.2% after topping out at 1,580 and spending the rest of the session underwater.
Consumer Staples rose 0.9% while Real Estate was up 0.8% to lead sector strength while Health Care and Utilities added 0.7%. Energy was the only sector that lagged after slipping 0.03%.
Global Economy – European markets climbed to 1-week highs after the European Central Bank offered a brighter assessment of economic growth in the eurozone.
France’s CAC 40 surged 1.3%, the Belgium20 rallied 1.2% while the Stoxx Europe 600 soared 1.1%. Germany’s DAX 30 rose 0.9% and UK’s FTSE 100 climbed 0.6%.
ECB President Mario Draghi emphasized more dovish elements of the bank’s monetary policy statement, including a commitment to maintaining rates at present and low levels if warranted.
He said economic growth in the eurozone is improving faster than the bank had anticipated, leading it to nudge up its 2018 growth forecast to 2.4% from 2.3%. It slightly reduced its 2019 inflation forecast to 1.7% from 1.9%.
German January factory orders fell 3.9% month-over-month, weaker than expectations for a decline of 1.8%.
Asian markets rebounded solidly on Thursday, as markets in the U.S. and Europe stabilized. Hong Kong’s Hang Seng zoomed 1.5% and South Korea’s Kospi was higher by 1.2%. China’s Shanghai and Australia’s S&P/ASX 200 advanced 0.7% while Japan’s Nikkei added 0.5%.
The China February trade balance was in surplus by $33.74 billion, wider than expectations for a deficit of $5.70 billion. February exports surged 44.5% year-over-year, stronger than expectations of 11% and the biggest increase in 3 years.
February imports rose 6.3% year-over-year, weaker than expectations for a rise of 8%.
Japan Q4 GDP was revised upward to 1.6% from the previously reported 0.5%, topping expectations for a rise of 1%.
Initial jobless claims rose 21,000 to 231,000 in the week ending March 3rd, topping expectations of 220,000. The 4-week moving average rose to 222,500 from 220,500. Continuing claims dropped 64,000 to 1,870,000 in the February 24th week.
Quarterly Services Survey Information Revenue up 1.3% for the quarter, and 6.5% for the year.
U.S. Challenger reported February announced layoffs declined 9,300 to 35,400. Projected job cuts declined further on an annual basis, falling to -4.3% year-over-year versus -2.8%.
According to the report, employers are holding on to workers given the tight job market and difficulties in finding qualified people. It was also reported that announced job cuts have been below 50,000 for a record 22 months.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) traded in positive territory throughout the session while reaching a peak of $118.99.
Lower resistance at $118.50-$119 held with a close above the latter being a slightly bullish development. Support is trying to move up to $118.25-$118 with a close below $117.50 signaling a short-term top.
Market Analysis – The Russell 3000 Index ($RUA) tested a high of 1,622 with resistance at 1,620-1,625 holding. The close above the 50-day moving average was a bullish signal that could lead to a quick run to 1,640 on a move above 1,625.
Near-term support is at 1,610-1,600 with a close below the latter signaling a short-term top.
RSI has cleared 50 with continued closes above this level being a slightly bullish development for another run to resistance at 60. Support is at 40 if 50 fails.
The Real Estate Select Sector Spider (XLRE) traded to a high of $30.77 into the closing bell to clear lower resistance at $30.75-$31. Additional hurdles are at $31.25 and the 50-day moving average. Support is at $30.25-$30 with a close below the latter signaling additional weakness.
RSI is in a slight uptrend and has cleared the 50 level with resistance at 60. Support is at 45-40. Last time we covered XLRE we talked about how the 50-day moving average was on track to fall below the 200-day moving average.
The death cross is official and is usually a bearish development for lower lows.
Existing Position Update
AAPL increased in value and posed to break 180 level to the upside.
The current congestion is favoring the bulls and if we test old highs, there’s a good chance the major indices will shatter the 50 day line and continue rising.
AAPL has massive market share – which influences the indices directly. Keep your eye on how it bounces off the previous high when it reaches that price level.
FB relative strength is not rising…which is the predominant reason why I like the iron condor at this time.
I’m expecting price to revert back lower within the next few sessions and cause the iron condor to move back into the safety zone once again.
AMZN has one day left before expiration. The price of stock is closely following the major indices. I’m watching the position closely and if price increases sharply, we will liquidate the spread before the close to avoid exercise.
I will update you tomorrow as usual.
Roger