U.S. markets opened higher and held positive territory throughout Monday’s action following a weekend without any major headlines representing an escalation in the trade tariffs the U.S. is waging with China and Europe.
Economic news was light as the relative market calm has a chance to continue with companies in their quiet period ahead of the 2Q earnings season.
The big day is this Friday when a number of Financials stocks will be reporting with earnings really picking up steam in the next few weeks.
Volume was light and remains a slight concern although volatility continues to creep lower and is signaling continued market momentum.
The Dow jumped 1.3% after trading to a high of 24,796 while easily closing back above its 50-day moving average. Continued closes above resistance at 25,000 would be a bullish signal.
The S&P 500 soared 0.9% and is approaching mid-June highs following the run to 2,784.
There is a cluster of resistance at 2,785-2,790 with a close above the latter likely leading to a strong push past 2,800.
The Nasdaq was up for the 3rd-straight session after rising 0.9% and making an late day push to 7,757. The index is less than 1% away from fresh all-time highs north of 7,800.
The Russell 2000 was higher by 0.6% after extending its win streak to five-straight sessions while reaching a peak of 1,704.
The small-caps held the 1,700 level with the all-time high just north of 1,708.
Financials and Industrials were the strongest sector after rising 2.3% and 1.9%, respectively. Energy advanced a 1.5% and Consumer Discretionary was up 1.2%.
Utilities sank 3.1% to lead sector laggards while Real Estate and Consumer Staples were down 0.9% and 0.4%.
Global Economy – European markets showed continued strength despite the sudden resignation of David Davis, the U.K.’s top negotiator with the European Union over Brexit. U.K. Prime Minister Theresa May appeared to have united her cabinet around a new Brexit plan but with Davis stepping down, that potentially puts any new plan at risk.
UK’s FTSE 100 rallied 0.9% and the Belgium20 gained 0.7%. The Stoxx 600 Europe rose 0.6% while France’s CAC 40 and Germany’s DAX 30 were up 0.4%.
ECB Executive Board member Coeure said the impact on business confidence due to trade tension risks has so far been limited and there’s currently no reason to change policy expectations as the backdrop is for very strong, resilient growth in the Eurozone.
The Eurozone July Sentix investor confidence unexpectedly rose 2.8 to 12.1, stronger than expectations for a decline of 0.3 to 9.
The German May trade balance narrowed to a surplus of 19.7 billion euros, smaller than expectations of 20.2 billion euros.
May exports rose 1.8%, stronger than expectations of 0.7%. May imports unexpectedly rose 0.7%, stronger than expectations for a decline of 0.5%.
Asian markets finished higher after the Shanghai Stock Exchange said large cap stocks were at reasonable or undervalued levels compared to peers at other major economies.
China’s Shanghai zoomed 2.5% and Hong Kong’s Hang Seng was up 1.3%.
Japan’s Nikkei soared 1.2% and South Korea’s Kospi was higher by 0.6%. Australia’s S&P/ASX 200 climbed 0.2%.
The Japan June eco watchers survey outlook rose 0.8 to 50, below forecasts for a reading of 50.1.
The June eco watchers survey current rose 1 to 48.1, matching expectations.
Consumer Credit surged to $24.6 billion in May following a revised $10.3 billion increase in April. This represents a 7.6% year-over-year pace, more than doubling the 3.2% in May.
Non-revolving credit climbed $14.8 billion versus $9.2 billion.
Revolving credit was up $9.8 from the prior $1.1 billion gain. For Q1, credit was up $31.9 billion, though only half of the $63.4 billion surge from Q4.
The TD Ameritrade IMX Level for June was at 5.45.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) fell for the first time in four sessions following the backtest to $121.90.
Upper support at $122-$121.50 was breached with a close below the latter signaling additional weakness. Lowered resistance is at $122.50-$123.
RSI is back in a downtrend after failing multi-month resistance at 70. Shaky support is at 60 with risk to 50 on a move below this level.
Market Analysis – The Russell 3000 Index ($RUA) traded higher for the 6th time in 7 sessions with Monday’s peak reaching 1,660. Near-term and lower resistance at 1,660-1,665 held into the closing bell.
Continued closes above the latter gets 1,690-1,700 and fresh all-time highs from January back in play.
Rising support is at 1,645-1,640. A move below 1,635 would be a slightly bearish development with a continued backtest towards 1,620 and a rising 50-day moving average.
RSI is in a strong uptrend with resistance at 65-70.
A move above the latter would signal continued strength and breakout territory. Support is at 60-55.
The Consumer Staples Select Spiders (XLP) fell for the first time in four session despite showing midday strength and trading up to $52.33.
Near-term resistance at $52.50-$53 and the 200-day moving average easily held with continued closes above the latter being a bullish sign.
Upper support at $52-$51.50 held on the pullback to $51.96 afterwards.
A close back below $51.25 could lead to a possible pullback towards $50.50-$50 and a 50-day moving average that is showing signs of curling higher.
RSI failed resistance at 70 with a close above this level signaling additional strength towards 75 and January highs. Support is at 60.
Existing Position Update
AMZN bull put spread declining.
Still intend to turn NFLX into iron condor spread – just looking for price to rise more before doing so.
No fill yet on TLT – expect price to trade lower in the near term.
Markets may become a bit choppy over the near term…unless earnings supersede expectations.