U.S. markets showed continued momentum to start the second-quarter following better-than-expected economic news and positive trade developments with China resuming this week in Washington.

Monday’s breakout to higher highs also cleared prior and major resistance levels with all-time highs clearly in play ahead of the “official” start of 1Q earnings.

The Nasdaq rallied 1.3% after trading to a second half high of 7,831. Prior and lower resistance at 7,800-7,850 was cleared with a move above the latter signaling a possible push towards 7,950-8,000 and fresh 2019 highs.

The Dow was also up 1.3% following the late session run to 26,280 and fresh 2019 high. Prior and lower resistance at 26,250-26,500 was cleared and held with a move above the latter getting 26,750-27,000 in focus.

The S&P 500 soared 1.2% after tapping a high of 2,869 ahead of the closing bell. Fresh and lower resistance at 2,850-2,875 was cleared on the close above the former and new 2019 high.

The Russell 2000 gained 1.1% after closing at 1,556 and session peak. Prior and lower resistance at 1,560-1,575 was challenged but held with a move above the latter and the 200-day moving averaged signaling additional momentum.

Financials and Industrials led sector strength after zooming 2.5% and 2.1%, respectively.

Communication Services and Materials were were higher by 1.5%.

Utilities were down 0.7% to pace sector weakness while Consumer Staples and Real Estate declined 0.3% to round out the laggards.

Global Economy – European markets settled higher ahead of a vote on alternatives to the Brexit process with reports that Prime Minister May could put her withdrawal agreement to a 4th vote on Tuesday.

The U.K. has less than 2 weeks to decide a way forward for the Brexit process or risks leaving the EU on April 12th without a deal.

The Belgium20 soared 1.6% and the Stoxx 600 Europe jumped 1.5%. Germany’s DAX 30 rallied 1.4% and UK’s FTSE 100 added 1.2%. France’s CAC 40 was up 1%.

Asian markets closed higher across the board on better-than-expected economic news out of China.

China’s Shanghai surged 2.5% and Hong Kong’s Hang Seng rose 1.8%.

Japan’s Nikkei advanced 1.4% and South Korea’s Kospi was up 1.3%.

Australia’s S&P/ASX 200 gained 0.6%.

China Manufacturing PMI for March rose to 50.5 from 49.2 in February, topping expectations for a reading of 49.6, and the first time in 4 months the number was above the 50 level.

China non-manufacturing PMI was also better than expected at 54.8 versus estimates of 54.4.

Retail Sales declined -0.2% in February, and fell -0.4% excluding autos, weaker than expectations for gains of 0.4% and 0.8%, respectively.

However, the 0.2% January gain was revised up to 0.7%, while the 0.9% ex-auto result was bumped to 1.4%, to help offset some of the February’s weakness.

Sales excluding autos, gas, and building materials fell -0.2% versus the prior 1.4% jump. Motor vehicles and parts sales were up 0.7% from -1.9% while gas station sales rebounded 1% from -1.2%.

Building materials dropped to -4.4% from -3.3%.

Furniture were at -0.5% from -0.3%. Food/beverage sales were down 1.2% from 1.4% while clothing was at -0.4% from -0.6%. Electronics declined to -1.3% from -0.6% and hand personal care sales were at 0.6% from 1.6%.

PMI Manufacturing Index slipped 0.6 points to 52.4 in the final March reading, just below estimates for a print of 52.5.

New orders declined to their lowest since June 2017, while input prices softened to the weakest since August 2017.

Though still in expansionary territory, the slowing bears watching. The report noted that companies see some of the slippage as a result of capacity constraints, especially in terms of skills shortages.

ISM Manufacturing Index rose 1.1 to 55.3 in March, a little better than forecasts of 54.2. The components were mixed with employment rising to 57.5 from 52.3 while production improved to 55.8 from 54.8.

New orders increased to 57.4 from 55.5. On the flip side, new export orders fell to 51.7 from 52.8 and imports dropped to 51.1 from 55.3. Supplier deliveries slipped to 54.2 from 54.9, with the order backlog gauge at 50.4 from 52.3. Prices paid jumped to 54.3 from 49.4.

Business Inventories for January climbed 0.8%, topping forecasts of 0.3%, with sales up 0.3%. This follow December prints of 0.8% for inventories and a decline of -0.9% for sales.

The inventory-sales ratio edged up to 1.39 from 1.38.

Construction Spending increased 1% in February, beating expectations for a dip of -0.2%. Residential construction spending edged up 0.7% from 1.8% previously and nonresidential spending was up 1.2% from 2.9%.

Private spending was 0.2% higher from the 1.5% gain to start the year and public spending surged 3.6% from 5.7%.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) fell for the 2nd-straight session following the intraday plunge to $124.19.

Fresh and upper support at $124.50-$124 failed to hold.

A close below $124 would be a bearish signal with risk towards $123-$122.50 and prior breakout levels from mid-March.

Lowered resistance is at $124.75-$125.25.

Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) extended its winning streak to 3-straight sessions following the intraday run to $262.66 and fresh 2019 peak.

Prior and lower resistance from late February at $262-$262.50 was cleared and held.

Continued closes above the latter would confirm a possible triple-top breakout with upside potential towards $264.50-$265, depending on momentum.

Current support is at $261.50-$261.

A close back below the $260 level would signal another false breakout attempt with risk towards $258-$257.50.

The 50-day moving average remains in a nice trend after clearing the 200-day moving average in mid-March to form a golden cross.

RSI is in an uptrend with resistance at 65-70 and the latter representing the late February peaks.

Continued closes above the 70 level would be a bullish development for additional strength towards 75-80 but also signaling slightly overbought levels.

Support is at 60.

The Technology Select Sector Spiders (XLK) was also up for the 3rd-straight session after testing an intraday peak of $75.10. Mid-March and upper resistance at $74.50-$75 was cleared and held.

Continued closes above the late March and 2019 high of $75.25 could lead to a run towards $77-$77.50.

Rising support at $74.50-$74.

A close below the latter would be a slightly bearish development and signal another possible near-term top. The 50-day moving average has cleared the 200-day moving average to form a golden cross. This is typically a bullish signal for higher highs.

RSI is in an uptrend with resistance at 70.

A move above this level would signal additional strength towards 75-80 with the latter representing the March peak. Support is at 65-60.

All the best,
Roger Scott.