U.S. markets opened sharply higher with momentum carrying over into the new trading week. There was some divergence shortly afterwards, as the major indexes traded in a very narrow range, with the small-caps dipping into negative territory.

Global trade tensions were again in focus with volatility easing in the second half of action and closing all-time highs in play.

The Nasdaq rallied 0.7% after trading to an intraday high of 7,607 while clearing and holding the 7,600 level for the first time. The all-time intraday high is at 7,637 from mid-March.

The Dow was up 0.7% after reaching a peak of 24,859 to clear lower resistance at 24,800-25,000.

The S&P 500 added 0.5% after trading up to 2,749 ahead of the closing bell. We mentioned a close above the 2,750 level would be a continued bullish signal.

The Russell 2000 climbed 0.3% despite early morning weakness while tapping an all-time an intraday high of 1,655 ahead of the closing bell. We mentioned there is the possibility of 1,675-1,680 tripping on continued momentum.

Consumer Discretionary rose 1.2% to led sector strength while Consumer Staples jumped 1%.

Materials and Tech were up 0.8%. Energy and Utilities were the leading sector laggards after falling 0.9% and 0.8%, respectively.

Global Economy – European markets were up for a second-straight session despite weaker-than-expected economic data as political waters in Spain and Italy remained calm.

The Belgium20 rose 0.7% and UK’s FTSE 100 was up 0.5%. Germany’s DAX 30 gained 0.4% and France’s CAC 40 climbed 0.1% higher. The Stoxx 600 Europe advanced 0.3% while

The Eurozone June Sentix investor confidence fell 9.9 to 9.3, weaker than expectations for a reading of 18.5.

Eurozone April PPI was unchanged for the month but was up 2% year-over-year, weaker than forecasts for a rise of 0.2% and 2.4%, respectively.

The UK May Markit/CIPS construction PMI was flat at 52.5, ahead of expectations for a dip of 0.5 to 52.

Asian markets showed green on the screen following despite heated comments over the militarization of disputed islands in the South China Sea.

Hong Kong’s Hang Seng soared 1.7% and Japan’s Nikkei surged 1.4%.
China’s Shanghai was higher by 0.5% and South Korea’s Kospi added 0.4%. Australia’s S&P/ASX 200 rallied 0.6%.

U.S. Defense Secretary Jim Mattis warned there could be “much larger consequences” in the future from China’s moves to install weapons systems on islands in the sea.

He didn’t specify what the consequences would be in comments made at a regional security conference when asked about the situation.

Factory Orders fell 0.8% in April, below forecasts for a decline of 0.5%.

Durable goods orders were revised to down 1.6% from the 1.7% decline in the advance report. Transportation dropped 6% following March’s 6.9% surge.

Excluding transportation, orders edged up 0.4% versus the prior 0.5% gain. Non-defense capital goods orders excluding aircraft climbed 1%, reversing the 1% March slide.

Shipments were unchanged after March’s 0.7% pop. Non-defense capital goods shipments excluding aircraft were up 0.9% from a -0.7% reading in March.

Inventories increased 0.3% from 0.2% previously while the inventory-shipment ratio was steady at 1.35.

TD Ameritrade IMX Level checked in at 5.06.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) traded in negative territory throughout the session while testing a low of $119.37. Support at $119.25-$118.75 and the 50-day moving average is back in the mix with a close below the latter signaling additional weakness.

Lowered resistance is at $119.75-$120.25.

Market Analysis – The Russell 3000 Index ($RUA) closed higher for the 3rd-time in four sessions after reaching a peak of 1,635.

We have been highlighting the tight trading range throughout the May and mentioned continued closes above prior resistance at 1,625-1,630 would be a bullish development. Additional hurdles from late February are at 1,640-1,650.

Rising support is at 1,625-1,620 with a move the latter likely leading to a continued backtest towards 1,610-1,600.

The 50-day moving average is starting to curl higher and has been flatlining since mid-April.

RSI is trying to clear and hold March and May resistance at 60-65.

A move above the latter would signal continued strength and a possible run past 70. Support is at 55-50.

The Energy Select Sector Spider (XLE) closed lower for the 7th time in nine sessions despite testing a high of $77.20 shortly after the open.

Near-term resistance at $77-$77.25 has been holding for the past 4 sessions with a close above the latter being a slightly bullish development.

XLE is trying to form a floor of support at $75.50-$75 with a close back below the latter signaling additional weakness.

RSI is trying to hold support is 50-45 with a move below the latter signaling additional weakness. Early April resistance is at 55-60.

Existing Position Update

Going to roll PYPL tomorrow if we don’t see sharp downturn by mid-day.

I’m not expecting price action to go much further – but with stocks making new highs – the bulls are controlling the markets once again.

TSLA looks fairly stable and I’m not anticipating too much directional bias over the next few sessions.

Keep an eye on alert for tomorrow.

Roger Scott