U.S. markets showed continued strength on Monday to push 2019 and fresh all-time highs with the gains coming ahead of Wednesday’s Fed update on interest rates.

New developments on the U.S. and China trade front also helped sentiment after Treasury Secretary Steven Mnuchin said that negotiations were in the final stages.

A busy week of earnings will also help influence market momentum and determine if the blue-chips and small-caps will join the overall market into further blue-sky territory. Volatility stayed neutral after closing slightly higher while holding new resistance.

The Russell 2000 led the way higher for the 2nd-straight session after rising 0.4% while tapping an intraday high of 1,603.

Major resistance from February at 1,600 was cleared but held with continued closes above the this level leading to a run towards 1,625-1,640.

The Nasdaq added 0.2% after trading to an intraday all-time of 8,176. Lower resistance at 8,150-8,200 was cleared and held with fresh hurdles at 8,250-8,400 on continued momentum.

The S&P 500 climbed 0.1% following the intraday run to 2,949 and new record peak.

Fresh resistance at 2,950 held by a half-point with new horizons at 2,975-3,000 on continued near-term strength.

The Dow rose 11 points, or 0.04% after testing a late session high of 26,602. Lower resistance at 26,500-26,750 was cleared and held with a move above the latter getting 27,000 in play with the all-time high currently at 26,951.

Financials surged 1% to lead sector strength while Communication Services jumped 0.9%.

Real Estate and Utilities paced sector weakness after sliding 1% and 0.6%, respectively.

Global Economy – European markets closed higher across the board despite weaker-than-expected economic news from the eurozone.

The Belgium20 advanced 0.3% while Germany’s DAX 30 and the Stoxx 600 Europe nudged up 0.2%. France’s CAC 40 and UK’s FTSE 100 added 0.2%.

Eurozone economic sentiment slipped for the 10th consecutive month to 104 points in April, down from 105.6 in March, and the lowest level in more than two years.

Spain’s ruling socialists clinched victory in the country’s general election over the weekend.

Spain’s Vox party gained 24 seats, making it the first far-right party to enter parliament since military rule ended in the 1970’s.

Asian markets settled mixed with Japan’s Nikkei closed until May 6th to celebrate the enthronement of the country’s Crown Prince Naruhito.

South Korea’s Kospi zoomed 1.7% and Hong Kong’s Hang Seng rallied 1%. China’s Shanghai fell 0.8% and Australia’s S&P/ASX 200 gave back 0.4%.

Personal Income edged up 0.1% in in March, missing forecasts of 0.3%, and below February’s 0.2% gain. Personal consumption expenditures increased 0.9% in March following the 0.1% February gain.

Wages and salaries were up 0.4% in March versus February’s 0.3% print.

The savings rate slowed to 6.5% last month from 7.3% in February. The PCE chain price index rose 0.2% in March versus 0.1% in February with the core rate unchanged following February’s 0.1% increase.

On a 12-month basis, the headline price index grew at a 1.5% year-over-year clip versus 1.3% previously, with the core rate slowing to 1.6% versus 1.7%.

Dallas Fed Manufacturing Survey fell 4.9 points to 2 in April, weaker than expectations of 9.8, and below the 6.9 level in March.

The employment index slid to 4.6 from 12.2 with the workweek at 8.1 from 6.3 and wages at 28.2 from 30. New orders improved to 9.8 from 2.2. Prices paid fell to 7.9 from 18.9 with prices received at 6 from 6.5.

The 6-month index was unchanged at 18.4.The future employment component was at 33.4 from 37.5 with new orders at 35.9 from 42.7. Prices paid drop more than half to 14 from 28.2 with capex falling to 26.2 from 36.

Atlanta Fed GDPNow updated its forecasts with a current 1.25% Q2 rate of growth.

Market Sentiment – The FOMC minutes should be uneventful but there will be lots going on behind the scenes. An unchanged rate stance is widely expected by the market though expectations remain for a possible rate cut down the road.

The Fed has been focused on inflation with chatter that some Committee members want to adopt an average price target and allow the economy and prices to run hot.

This would possibly shift the inflation goal posts with an insurance easing but an outcome the market doesn’t really expect.

Additionally, with the firmer effective funds rate at 2.44% last week producing a 4 basis-point gap to IOER, there is talk of a cut in the latter.

This could also be premature talk but nevertheless, curve steepeners remain the play in the Treasury market, reflecting either a potential easing in short term rates or some building inflation pressure.

The iShares 20+ Year Treasury Bond ETF (TLT) tumbled to an intraday low of $122.85.

Prior and upper support at $123-$122.50 held.

A close below the latter and the 50-day moving average would signal additional weakness towards $122 and the monthly April lows.

Lowered resistance is at $123.50-$124.

Market Analysis – The Russell 3000 Index ($RUA) was up for the 2nd-straight session after
trading to a fresh 2019 high of 1,738.

Major resistance from late August 2018 at 1,735 was cleared but held by a quarter-point. Continued closes above this level gets 1,750-1,765 in play with the current all-time high just north of 1,743.

A golden cross formed at the start of the month with the 50-day moving average clearing the 200-day moving average. This is typically a bullish signal for higher highs.

Rising support at 1,725-1,710. A close below 1,700 end support since early April would be a slightly bearish development with risk towards 1,675 and the 50-day moving average.

RSI is in an uptrend after clearing major resistance at 70 and a level that has been holding since early February.

Continued closes above 70 would signaling additional strength towards 75-80 and January 2018 highs. Support is at 65-60 with the latter representing the monthly low.

The Technology Select Sector Spiders (XLK) snapped a 2-session slide after testing a high of $78.83. Prior and new resistance at $79-$79.50 held with last week’s all-time peak at $79.46.

Continued closes above the latter could lead to a run towards $80-$81.50 over the near-term.

Current support is at $78.50-$78.

A close below the latter would be a slightly bearish development and signal a possible near-term top with further risk towards $77-$76.

The $76-$75.75 area has formed a nice base since early April with a move below the latter signaling a possible and deeper pullback.

RSI is flatlining with resistance at 80 and the high from earlier this month and in March.

There is a chance for a run towards 85 and the November 2017 peaks on a move above 80 but still signaling oversold levels. Support is at 70 with risk towards 65-60 on a close below this level.

Position Update

Waiting for NFLX to trade a bit lower.

May initiate credit spread on tech after few big caps report later in the week.

Next 3 days will include substantial uncertainty since over 800 companies are reporting numbers.

I don’t want to trade ahead of big numbers.

If numbers begin lagging behind expectations, we may turn to iron condors as early as next week.

Roger Scott.