U.S. markets closed higher for the 4th-straight week following Friday’s continued run at record all-time highs.

The Nasdaq jumped 1.3% to close at a lifetime high of 7,505 and was up 2.3% for the week.

The S&P 500 soared 1.2% to finish at 2,872 and another record high following a weekly gain of 2.2%.

The Russell 2000 added 0.4% after closing at 1,608 and shy of its all-time high of 1,615. For the week, the small-caps were up 0.7%.

The Dow gained 0.9% after settling at an all-time high of 26,616 while closing the week 2.1% higher.

Nearly 20% of the S&P 500 members that have reported results for Q4 thus far have been impressive.

Earnings are up 8.6% from the same period last year on 7.7% higher revenues, with 81% topping EPS estimates and 74% beating revenue estimates.

For Q4 as a whole, total earnings for the S&P 500 index are expected to be up 10.8% from the same period last year on 7.3% higher revenues.

For the small-cap S&P 600 index, Q4 results from nearly 10% of its members are in, with earnings up 22.1% on 15.4% higher revenues.

The proportion of positive earnings per share and revenue surprises are at 61% and 57%, respectively.

Companies are announcing big one-time charges related to the tax law change, which is making the gap between adjusted operating earnings and GAAP earnings the highest in recent years.

There are 125 S&P 500 companies, including 10 Dow components, reporting earnings this week.

Needless to say, their results will move the market and certain sectors.

Global Economy- European markets closed higher across the board following news of a strengthening British economy.

France’s CAC 40 was higher by 0.9% and UK’s FTSE 100 rallied 0.7%. The Stoxx Europe 600 rose 0.5% and the Belgium20 was up 0.4%. Germany’s DAX 30 advanced 0.3%.

Eurozone December M3 money supply rose 4.6% year-over-year, weaker than expectations of 4.9%.

UK Q4 GDP rose 0.5% quarter-over-quarter and 1.5% year-over-year, stronger than expectations of 0.4% and 1.4%, respectively.

Asian markets were mixed with Hong Kong’s Hang Seng showing continued momentum after zooming 1.5%. South Korea’s Kospi gained 0.5% and China’s Shanghai rose 0.3%.

Japan’s Nikkei slipped 0.2% while Australia’s S&P/ASX 200 dipped 0.1%.

Japan December national CPI rose 1% year-over-year, weaker than expectations for a rise of 1.1%. December national CPI ex-fresh food rose 0.9% year-over-year, matching expectations.

December national CPI ex-fresh food & energy rose 0.3% year-over-year, weaker than expectations of 0.4%.

China December industrial profits rose 10.8% year-over-year, the smallest pace of increase in a year.

U.S. Advance durable goods orders climbed 2.9% in December, nearly three times expectations, and follows the 1.7% bounce in November.

Transportation orders were up 7.4% from 4.6%. Excluding transportation, orders were up 0.6% from 0.3%.

U.S. Q4 GDP grew at a 2.6% pace, after a 3.2% clip in Q3 and 3.1% in Q2. Although slightly disappointing, on a 12-month basis, growth accelerated slightly to 2.5% year-over-year versus 2.3%.

Additionally, consumption growth increased at a solid 3.8% after the prior 2.2% rate.

December Retail Inventories were up 0.2%, topping expectations for rise of 0.1% for the month.

December Wholesale Inventories were up 0.2% versus forecasts of 0.3% for the month.

December International Trade in Goods Balance checked in at a deficit of $71.6 billion versus expectations for a deficit of $69 billion.

Baker-Hughes reported that the U.S. rig count was up 11 rigs from last week to 947, with oil rigs up 12 to 759, gas rigs down 1 to 188, and miscellaneous rigs unchanged.

The U.S. Rig Count was up 235 rigs from last year’s count of 712, with oil rigs up 193, gas rigs up 43, and miscellaneous rigs down 1 to 0. The U.S. Offshore Rig Count was down 2 rigs at 17 and down 4 rigs year-over-year.

Market Sentiment- The Federal Open Market Committee will meet on Tuesday and Wednesday with an update at 2:00pm (EST) on the latter day.

Economists don’t expect any major policy changes but the central bank will attract its fair share of attention. It is also the last meeting that Janet Yellen will chair before she hands over the duties to Jerome Powell.

The iShares 20+ Year Treasury Bond ETF (TLT) traded in the red throughout the session with the low reaching $123.10.

Near-term support at $123-$122.50 held with a close below the latter leading to $122-$121.50 and a retest of the October lows. Resistance remains at $123.75-$124 and the 200-day moving average.

RSI is in a slight downtrend with support at 40. A close below this level would signal additional weakness that could lead to a retest to the 35-30 area.

 

Market Analysis- The Spiders Dow Jones Industrial Average ETF (DIA) traded to an all-time high of $265.93 on Friday.

Continued closes above $265 keeps fresh resistance at $267-$267.50 in play. Rising support is at $265-$264.50 with a close below $264 signaling a possible short-term top.

RSI remains in overbought territory near the 90 level and October/ early January resistance. Continued momentum could carry RSI towards 95. Support is at 85-80 with risk to 70 on a move below the latter.

The Consumer Staples Select Spiders (XLP) tested an all-time high of $58.74 on Thursday with Friday’s peak reaching $58.73.

Fresh resistance is at $58.75-$59 with a close above the latter leading towards a run at the $60 level. Support is at $58.50-$58.25 with a move below $58 signaling a possible near-term top.

RSI is pushing early December resistance at 75 level with May hurdles at 80 on continued closes above this level.

The percentage of Nasdaq 100 stocks trading above the 50-day moving average closed Friday at 87.5% and week ago levels.

Current and February 2017 resistance at 90%-91.5% remains in play. Support is at 85%-82.5% with a move below the 80% level signaling a short-term top for the Nasdaq 100.

The percentage of S&P 500 stocks trading above the 200-day moving is currently at 82.1% and is at one-year highs. Multi-year resistance from June 2014 is at 85% and would be in play on continued closes above 82.5%.

Current support is at the 80% level.

Health Care surged 2.2% while Technology soared 1.6% to led sector strength. Health Care was up 3.5%; Consumer Discretionary added 3.2%; and Real Estate gained 2.3% for the week.

There were no sector laggards on Friday, or for the week, as all sectors closed higher.

All the best,
Roger Scott