U.S. markets were strong throughout the session as a possible relief rally continued with trade war rhetoric appearing to have cooled entering into a period of reflection and negotiation before implementation.

President Trump’s economic advisor, Larry Kudlow, added to his soothing remarks from Wednesday, noting he expects a trade deal with China over time. Meanwhile, volatility closed below a key level of support.

The Dow gained 1% for the second-straight session after trading to a high of 24,622 The S&P 500 advanced 0.7% after making a run to 2,672. However, both indexes remain below their 50/100-moving averages.

The Russell 2000 was higher by 0.7% after reaching a peak of 1,545 to close between its 50-day and 100-day moving averages.The Nasdaq was up 0.5% after trading to a high of 7,112.

The index cleared its 100-day moving average but a level that failed to hold into the closing bell.

Materials and Energy led sector strength after rising 1.9% and 1.8%, respectively. Consumer Discretionary was up 1.4%. Health Care was the only sector laggard after slipping 0.1%.

Global Economy – European markets showed strong gains across the board to closer higher for the first time this week. Germany’s DAX 30 zoomed 2.9% and France’s CAC 40 surged 2.6%. The Stoxx 600 Europe and UK’s FTSE 100 rallied 2.4% while the Belgium20 fell 2.1%.

The final Eurozone services PMI ticked down to 54.9 for March from the flash number of 55.

The Purchasing Managers’ Index dropped to 55.2 in March, from 57.1 the previous month.

Asian markets were higher with the Chinese markets closed for a holiday. South Korea’s Kospi and Japan’s Nikkei jumped 1.5% while Australia’s S&P/ASX 200 rose 0.5%.

Challenge Job-Cut Report showed layoffs rose 25,000 in March to 60,400, after falling 9,300 in February to 35,400. This represented the highest monthly total since April 2016 and brings the year-to-date figure to 140,400.

The 12-month pace rose at a 39.4% year-over-year, clip versus -4.3% year-over-year previously. Retail led the increase in announced job cuts with 28,900, followed by telecome at 3,100.

Store closings was the number one reason, with restructuring coming in second, followed by bankruptcies. Announced hirings fell 125,400 to 14,500.

Jobless Claims climbed 24,000 to 242,000 in the week ending March 31st, topping expectations for a print of 230,000. The 4-week moving average rose to 228,250 from 225,250. Continuing claims sank 64,0p- to 1,808,000 in the March 24th week, the lowest since December 1973.

International Trade in Goods deficit widened to $57.6 billion, matching expectations and a fresh cycle-high in February, up from $56.7 billion and the prior high in January.

The February gap was $0.5 billion wider than indicated by the advance trade report thanks to a larger upside surprise for imports than exports with big boosts for both. Exports were up 1.7% and imports were also up 1.7%.

Atlanta Fed’s Q1 GDPNow estimate was cut to 2.3% from 2.8%, closer to the Blue Chip economist consensus.

Market Sentiment – Fed funds futures were little changed to modestly lower heading into Friday’s March jobs report and comments on the outlook from Fed Chairman Powell.

Implied rates remain fully priced for another 25 basis point rate hike at the June 12th-13th FOMC meeting, and are suggesting about 75% odds for the Fed to pull the trigger one more time by year end for a third tightening in 2018, as indicated by the dots.

Atlanta Fed’s Raphael Bostic did not address policy or the economy in his speech on Fostering Financial Literacy and Economic Opportunity. However, in answering audience questions he said the Fed’s dot plot does not lock the FOMC into a rate path.

He stressed the dots reflect the range of opinions on the Committee, and added it’s not really critical to reveal which dot belongs to whom.

The iShares 20+ Year Treasury Bond ETF (TLT) declined for a third-straight session with today’s low tapping $119.77 ahead of the close.

Fresh support at $119.50-$119 and the 50-day moving average held with a close below the latter being a continued bearish development. Lowered resistance remains at $120-$120.50.

Market Analysis – The Spider Small-Cap 600 ETF (SLY) was higher for a third-straight session after reaching a peak of $135.28. Fresh resistance is at $135.50-$136 with a close above the latter being a continued bullish development.

SLY had spent the past 8 sessions below a downward sloping 50-day moving average with rising support now at $134.25-$133.75.

RSI is cleared 50 on Wednesday with continued closes above this level leading to a possible push towards February and mid-March resistance near the 60 area. Support is at 40 if 50 fails.

Bitcoin Investment Trust (GBTC) traded to a low $10.44 to close lower for the 8th time over the past 10 sessions. GBTC remains in a longer-term downtrend and is trying to form a base of support at $10.

This level held on the early February lows and in late November 2017. A close below $10 could lead to a continued backtest towards the $7.50 area. Near-term resistance is at $11.50-$12 and the 200-day moving average.

We mentioned in mid-March the 50-day moving average was on track to fall below the 200-day moving average and that still appears to be the case.

This would be a bearish development and would likely confirm lower lows in the months ahead.

RSI is in a downtrend with support at 30 and the February/ March lows. Resistance is at 40-45.

Existing Position Update

BABA is moving back up to safety zone. I’m expecting a bit more upside and possibly decline in volatility over the next few sessions, which will undoubtedly increase our premium.

TSLA continues to move higher and based on the trading range and volatility we could see a bit more good news and upside over the near term.

Initiated Bull put spread on long bond. I believe stocks will consolidate near the current level which will create sideways trading action in the bond market. I don’t think interest rates have clear direction and that will cause more sideways action.

Expect bear call spread to compliment our current position next few days for a full iron condor.

Roger Scott