U.S. markets traded in negative territory throughout much of Wednesday’s action as concerns for an impactful trade deal with China lingered and if a planned summit between the U.S. and North Korea will actually be held.

The afternoon release of the Fed minutes helped the market rebound as the major indexes turned positive afterwards while holding onto gains into the closing bell.

The Nasdaq showed the most strength after jumping 0.6% while reaching a peak of 7,426 to regain the 7,400 level for the first time in 7 sessions.

The S&P 500 gained 0.3% after closing on its session high of 2,733 while holding the 2,700 level for the 10th-straight session.

The Dow climbed 0.2% despite trading to a morning low of 24,667 while closing below the 25,000 level for the 2nd-straight day. The Russell 2000 also added 0.2% following a pullback to 1,618 while closing higher for the 5th time in 6 sessions.

Utilities and Real Estate lead sector winners after rising 0.9% and 0.8%, respectively. Financials fell 0.6% while Materials fell 0.2% and were the leading sector laggards.

Global Economy – European markets closed with heavy losses following disappointing economic news. Germany’s DAX 30 sank 1.5% and France’s CAC 40 tanked 1.3%. UK’s FTSE 100 and the Stoxx 600 Europe dropped 1.1% and the Belgium20 was lower by 0.8%.

German May Markit/BME manufacturing PMI fell 1.3 to 56.8, below expectations of 57.9.

The Eurozone May Markit manufacturing PMI slid 0.7 to 55.5, weaker than forecasts of 56.1.

The Eurozone May Markit composite PMI fell slipped 1 to 54.1, weaker than expectations for no change.

Asian markets were mostly lower with South Korea’s Kospi rising 0.3% to buck the trend. Hong Kong’s Hang Seng tumbled 1.8% and China’s Shanghai tumbled 1.4%. Japan’s Nikkei gave back 1.2% and Australia’s S&P/ASX 200 dipped 0.2%.

The Japan May Nikkei manufacturing PMI fell 1.3 to 52.5.

MBA Mortgage Applications were down 2.6% for the week ending May 18th.

May PMI Composite Flash Level came in at 55.7, topping expectations of 54.8. May PMI Composite Flash Manufacturing Level was 56.6, versus forecasts of 56.4.

April New Home Sales checked-in at 662,000 versus a forecast of 677,000.

Market Sentiment – Federal Reserve officials in their meeting in early May confirmed they planned to raise interest rates in June and were not concerned they were behind the curve on inflation.

Minutes from the meeting also said that members of the Fed committee think inflation temporarily above 2% could be helpful.

In making policy decisions over the next few years, the Fed said it should conduct policy with the aim of keeping inflation near its longer-run symmetric objective while sustaining the economic expansion and a strong labor market.

The Fed agreed that the actual path of the federal funds rate would depend on the economic outlook as informed by incoming information. The Federal funds futures market is pricing in more than a 90% chance of a June rate hike.

The iShares 20+ Year Treasury Bond ETF (TLT) traded higher for the 3rd-time in four sessions after making a strong push to $118.11 intraday.

Fresh resistance at $118-$118.50 held with additional hurdles at $119-$119.50 and the 50-day moving average. Rising support is at $117.50-$117.

RSI is back in a slight uptrend with late April and May resistance at 50. Continued closes above this level would be a bullish development. Support is at 45-40.

Market Analysis – The Russell 2000 ETF (IWM) closed in positive territory for the 6th time in 7 sessions despite the opening backtest to $161.13. Support at $161-$160.50 held with a move below $160 being a possible warning sign for lower lows.

We mentioned a couple of weeks ago an important technical picture was developing as IWM was in the midst of a double-top breakout, or a near-term triple-top formation from the mid-January and mid-March highs at the $160 level.

This level will try to hold as a new floor of support going forward.

Near-term resistance is at $162-$162.50 with continued closes above the latter being a bullish signal. The index tapped a fresh all-rime high of $163.33 on Tuesday.

A possible run towards $163.50-$165 could come on continued momentum into June.

RSI recently tested January resistance at 70 with continued closes back above this level signaling additional strength. Support is at 60-55 with a move below the latter signaling upcoming weakness.

The Dow Jones Transportation Average ($TRAN) traded lower for the 3rd time in four sessions following a backtest to 10,633. Mid-month support at 10,600 held.

A close below this level would be a slightly bearish development with risk to 10,500-10,400 and the 50-day moving average.

Multi-month resistance from February at 10,800 was cleared to start the week with continued closes above 10,900 being a bullish signal. If the Transports can clear and hold this level for several sessions, it would also be a positive development for the Dow blue-chips.

RSI has been in a slight downtrend with near-term support at 55-50. A close below this level opens up risk to the 40 area and early month lows. Resistance is at 60.

Current Position Update

Cut NFLX out since price remains bullish. Will revisit the spread once price stabilizes.

TSLA remains range bound. Expect more congestion unless volatility in broad market picks up slightly.

Looking at another position before end of week. Market should begin topping out in the near term next few sessions.

Roger Scott