U.S. markets rallied for the second-straight session to four-week peaks while clearing key technical hurdles in the process. Solid earnings results were more in focus as geopolitical and trade concerns eased.
White House economic advisor, Larry Kudlow, said that the Chinese are offering a constructive reaction to the trade dispute which helped lift market spirits.
The Nasdaq showed the most strength after surging 1.7% while testing a high of 7,298 to easily clear its 50-day moving average. The Russell 2000 closed in positive territory for the sixth-time in seven sessions after rallying 1.1% while making a push just south of 1,583.
The S&P 500 was up 1.1% after trading to an intraday high of 2,713 and holding the 2,700 level into the close.
The Dow jumped 0.9% after reaching a peak of 24,858 while closing in on the 25,000 level and prior mid-March support. Both indexes cleared their 50-day moving averages while regaining positive territory for the year.
Technology and Consumer Discretionary zoomed 1.9%. Real Estate soared 1.4% while Materials and Utilities were higher by 1.1%, respectively. There were no sector weakness.
Global Economy – European markets rebounded from Monday’s losses to close higher across the board. Germany’s DAX 30 jumped 1.6% while the Belgium20, France’s CAC 40, and the Stoxx 600 Europe rallied 0.8%. UK’s FTSE 100 gained 0.4%.
The German April ZEW survey expectations of economic growth fell 13.3 to a 5-year low of minus 8.2, weaker than expectations for a drop of 6.1.
Asian markets settled on both sides of the ledger following mixed economic news.
China’s Shanghai sank 1.4%, Hong Kong’s Hang Seng fell 0.8%, and South Korea’s Kospi slipped 0.2%. Japan’s Nikkei was higher by 0.1% and
Australia’s S&P/ASX 200 was up a less than a point.
China Q1 GDP rose 6.8% year-over-year, matching expectations.
China March industrial production rose 6% year-over-year, weaker than forecast for a rise of 6.3% and the slowest pace of increase in 7 months.
China March retail sales rose 10.1% year-over-year, topping expectations for a print of 9.7%.
Industrial Production rose 0.5% in March, with capacity at 78%, which was better than expectations for a rise of 0.4%.
Housing starts rebounded 1.9% to a 1,319,000 rate in March, while building permits rose 2.5% to a 1,354,000 rate.
Additionally, the IMF issued its latest projections for global growth of 3.9% in 2018 and 2019, unchanged from its prior forecasts in January.
Redbook Store Sales were up 3% for the year in the week ending April 14th.
Market Sentiment – Chicago Fed Charles Evans sees the Fed raising rates gradually without risk or evidence of an inflation surge, while there’s no need to hike rates much above a neutral setting.
He expects rates to continue to rise gradually over the next couple of years and says the economic is firing on all cylinders, with the job market solid and consumer fundamentals quite strong.
Evans sees forward momentum on capital spending and fiscal policy strongly expansionary. He said while global growth is picking up at the same time, there is some uncertainty from trade.
He views inflation somewhat below target but expects it to improve, while there’s little risk of accelerating markedly higher inflation. Overall, Evans seemed quite optimistic on the economic outlook, though still relatively calm about inflation prospects.
San Francisco Fed John Williams sees inflation closing in on the 2% target rate, while the economy continues its expansion.
He reiterated the FOMC should continue along its gradualist rate hike path, which would reduce the risks of an overheating economy. Williams added growth should average about 2.5% this year and next, while the unemployment rate could fall to 3.5% next year.
Philadelphia Fed Patrick Harker said the labor market is fairly tight and the U.S. student debt burden could dissuade potential students while hurting the economy. Harker did not stray into the current economy or policy.
The iShares 20+ Year Treasury Bond ETF (TLT) closed higher for a third-straight session after making a run to $121.58. Upper resistance at $121-$121.50 held with a close above this level being a continued bullish signal.
Support remains at $120.50-$120 with backup help at $119.50-$119 and the 50-day moving average.
Market Analysis – The Spider S&P 500 ETF (SPY) was up for the third time in four sessions after trading to a high of $270.87 and making a solid breakout above its 50-day moving average.
Fresh resistance at $270-$270.50 held with additional hurdles at $272-$272.50. Rising support is at $268-$267.50.
RSI is back in a solid uptrend with resistance at 60 from early March. Continued closes above this level would be a very bullish signal for a possible run towards 70.
Support is at 50 with a close below this level signaling a possible short-term top.
The Technology Select Sector Spiders (XLK) reached a peak of $68.29 while closing above its 50-day moving average for the second-straight session.
Longer-term resistance from January and March is at $68.50-$69 with continued closes above the latter being a very bullish signal. Rising support is at $67.50-$67.
RSI is back in an uptrend with near-term resistance at 60-65 and March highs.
A move above the latter would signal additional strength and a possible push towards 70-75. Support is at 50.
Existing Position Update
TLT was closed out today since I’m expecting potential corrective pressure to move into bonds – especially now that SPY is above the 50 day line.
Expect more upside over the next few days in large caps due to institutional accumulation near current price territory.
TSLA is being driven by news as opposed to technicals. I don’t expect price to decline to the short put side in the near term.
Expect another position before end of the week. I want to initiate iron condor at one time but want price to move a bit higher before doing so.
Roger Scott