U.S. markets showed opening momentum at the start of Wednesday’s trading and were able to hold positive territory while pushing fresh all-time highs and round number resistance.

The action was certainly calmer than the previous session with volatility settling back down.

The Dow showed the most strength after rallying 1.3% to an intraday record high of 26,130 while clearing and holding the 26,000 level into the closing bell.

The Nasdaq rose 1% after trading past 7,300 to 7,309 while setting just below this level and falling shy of its all-time high by 21 points.

The S&P 500 gained 0.9% after making a run to 2,807 and another lifetime high while ending the session above the 2,800 level.

The Russell 2000 added 0.8% after testing a high of 1,589 but struggled with resistance at 1,600 following Tuesday’s 4-point trip past this level.

Technilogy and Consumer Staples and showed the most strength after advancing 1.5% and 1.1%, respectively. Health Care was up 1% and Energy was higher by 0.9%. There were no sector laggards.

Global Economy- European markets closed lower with UK’s FTSE 100 stumbling 0.4% to close lower for the 3rd-straight session. Germany’s DAX 30 fell 0.5% while the Belgium20 and France’s CAC 40 also declined 0.4%.

The Stoxx Europe 600 slipped 0.1%.

Eurozone November construction output rose 0.5% month-over-month, the largest monthly increase in 9 months.

Eurozone December new car registrations fell 4.9% year-over-year to 1,088,000, the biggest decline in 8 months. Year-to-date, new car registrations rose 3.4% year-over-year to 15,137,732.

Asian markets settled on both sides of the ledger with Hong Kong’s Hang Seng rising 0.3% to close at a record high and just shy of the 32,000 level.

China’s Shanghai also added 0.3 while Japan’s Nikkei Stock fell 0.4% after failing the 24,000 level for the second-straight session.

Australia’s S&P/ASX 200 stumbled 0.5% and South Korea’s Kospi fell 0.3% while

Japan November core machine orders unexpectedly rose 5.7% month-over-month, stronger than expectations for a decline of 1.4%.

MBA Mortgage Applications were up 4.1% for the week of January 12th.

December Industrial Production jumped 0.9% last month, with capacity at 77.9%, which was better than the 0.2% growth forecast.

Fed’s Beige Book said the economy continued to expand into the end of the year, with 11 Districts reporting modest to moderate gains while Dallas reported a robust increase.

A majority of contacts across the nation also remain optimistic for 2018. Most Districts said non-auto retail sales were higher, with auto sales mixed. Some retailers said holiday sales were better than expected. Most manufacturers reported modest growth, but some indicated increased capital expenditures over the reporting period.

There was also continued growth in transportation activity. Residential real estate remained constrained, and there was little growth in home sales due to limited inventory.

The NAHB homebuilder sentiment index fell 2 points to 72 in January after jumping to 74 in December. Expectations were for a print of 73.

Market Sentiment- Dallas Fed President Robert Kaplan said the economy is going to be strong this year and he expects the unemployment rate to fall into the 3% range by year end and for inflation to firm up.

He added that he feels strongly and has a lot of conviction that the base case should be three rate hikes this year, and if he’s wrong could even potentially be more than that.

Kaplan went on to add the neutral rate has come down meaningfully but he still believes the Fed should be removing accommodation this year.

He repeated the Dallas Fed is forecasting growth in the 2.5% to 2.75% range for 2018. He went on to say low 10-year Treasury yield reflects expectations for slower economic growth and that tax cuts are coming at a time when the economy is at or near full employment.

He said this could add to employment and help push the rate down into the 3’s by the end of the year.

Chicago Fed Charles Evans is bullish on the economy which he says continues to do extremely well, though the biggest challenge remains low inflation, which needs to be boosted to 2%.

He anticipates stronger business investment this year, which should sustain a boost in growth the next couple of years.

Evans doesn’t view the increase in the deficit from tax cuts as sustainable longer-term, while he wouldn’t be surprised if the unemployment rate dipped below 4% in 2018.

The iShares 20+ Year Treasury Bond ETF (TLT) closed lower for the first time in four session after tapping a high of $125.64 shortly after the open.

Resistance at $125.50-$125.75 and the 50-day moving average held. The pullback to $124. 60 split support at $124.75-$124.50.

Market Analysis- The Spider Small-Cap 600 ETF (SLY) closed higher for the 9th time in the past 11 sessions after reaching a peak of $138.03. Fresh resistance at $138.50-$139 and Tuesday’s all-time peak at $138.86 held.

Continued closed above $139 gets $140.50-$142 in the mix. Rising and shaky support is at $136.50-$136 with a close below $135.50 being a slightly bearish development.

RSI briefly cleared November resistance at 70 with continued closes back above this level being a bullish signal for a possible push towards 80-90 and late September and early October highs.

The Utilities Select Spider (XLU) rebound today but continues to underperform after testing Mid-April and May support at $50-$49.75.

Tuesday’s low tapped $49.86 with a close below $49.75 signaling continued weakness towards $49-$48.75 and early March support levels. Near-term resistance is at $50.75-$51.

RSI remains in extremely oversold territory after falling towards the 20 level and holding.

Resistance is at 30-35 with continued closes above the latter signaling a possible near-term bottom is in.

All the best,
Roger Scott