U.S. markets showed continued momentum on Thursday, for the most part, with the blue-chips taking a breather.

Positive developments on prospects of a China trade deal along with continuing corporate earnings beats helped bullish sentiment.

Odds of another shutdown went up following partisan remarks on both sides of the isle over wall funding.

However, volatility closed at its lowest level of the month and continues to paint a bullish outlook for the market.

The Nasdaq jumped 1.4% following the intraday run to 7,303.

Late November and lower resistance at 7,300-7,350 was cleared but held with continued closes above the latter getting 7,400-7,450 and the 200-day moving average in play.

The S&P 500 was up 0.9% following the second half push to 2,708.

Fresh and lower resistance at 2,700-2,725 was cleared and held with a move above the latter leading towards a run at 2,750 and the 200-day moving average.

The Russell 2000 rose 0.8% after trading to morning high just north of 1,500.

Upper resistance at 1,490-1,500 was cleared but held by a half-point with continued closes above the latter getting 1,525-1,535 and late November hurdles in play.

The Dow dipped 15 points, or 0.06%, following the morning pullback to 24,842.

Fresh and lower support at 25,000-24,800 held along with the 200-day moving average on the close below the former by a half-point.

Communications Services zoomed 4.1% to led sector strength. Utilities and Consumer Staples soared 2.1% and 1.9%, respectively.

Materials paced sector weakness after falling 1.5%. Financials and Technology slipped 0.2% and 0.1% to round out the laggards.

Global Economy – European markets settled mostly higher despite disappointing news on the EU’s economic growth.

UK’s FTSE 100 and France’s CAC 40 climbed 0.4% while the Belgium20 was up 0.1%.

The Stoxx 600 Europe edged up less than a point, or 0.04%. Germany’s DAX 30 was lower by 0.1%.

The European Union said economic growth in the 19 countries that use the euro was 1.8% last year, down from 2.4% in 2017, which was its strongest performance in a decade.

There was a slightly pickup in the final three months of 2018, as gross domestic product rose at an annualized rate of 0.9%, compared with 0.6% in the three months through September.

Asian markets settled mixed following slightly encouraging data out of China.

Hong Kong’s Hang Seng and Japan’s Nikkei rallied 1.1% while China’s Shanghai advanced 0.4%.

Australia’s S&P/ASX 200 fell 0.4% and South Korea’s Kospi slipped 0.1%.

China Non-Manufacturing purchasing managers index rose to 54.7 in January from 53.8 in December. The new orders subindex for the entire nonmanufacturing sector increased to 51 in January from 50.4 last month.

The subindex measuring business activities for the service sector climbed to 53.6 from 52.3 in December, while the subindex measuring construction activities fell to 60.9 in January from 62.6 last month.

China January Manufacturing PMI edged up to 49.5 from 49.4 in December.

Challenger Job-Cut Report announced layoffs rose 9,100 to 53,000 in January, erasing the 9,200 decline in December to 43,900. The 12-month rate slowed to 18.7% year-over-year versus 35.3%.

Retail paced the reduction, as is typical following the holidays, with 22,300 announced job cuts.

Financials announced 4,200 layoffs. Announced hirings climbed 58,000 to 74,000 in January, paced by retail’s 66,700 surge.

Initial Jobless Claims jumped 53,000 to 253,000. The 4-week moving average rose to 220,250 from 215,250.

Continuing claims jumped 69,000 to 1,782,000 with claims filed by federal workers declining 11,000 to 14,700.

The Employment Cost Index rose 0.7% in Q4, as expected, after the 0.8% Q3 increase and Q2’s 0.6%.

Wages and salaries were up 0.6% versus the prior 0.9% jump, almost double the 0.5% Q2 gain.

Benefit costs increased 0.7% versus 0.4% previously. The annual pace rose to 2.9% year-over-year versus 2.8% in Q3 and Q2, and is the fastest pace since 2008.

Chicago PMI dropped 7.1 points to 56.7 in January, missing forecasts for a print of 62.5, and the lowest reading since January 2017 when it was at 49.9. The 3-month moving average slipped to 61.3 from 62.2.

New Home Sales jumped 16.9% to 657,000 in November, topping expectations of 560,000. The months’ supply of homes fell to 6 compared to 7 in October and September’s 6.5 count.

The median sales price declined 7% to $302,400 from $325,100 and is down 11.9% year-over-year versus 1.8%.

Atlanta Fed’s Q4 GDPNow estimate held steady at 2.7%, unchanged from its previous estimate.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) broke out of a 5-day trading range following the surge to $122.18.

Fresh and lower resistance from the end of December at $122-$122.50 was cleared but failed to hold.

Continued closes above the latter gets $123.50-$124 and the early January high at $123.86 in play.

Rising support at $121.50-$121.

Market Analysis – The Spider S&P 500 ETF (SPY) advanced for the 2nd-straight session after trading up to $270.47 intraday.

Near-term and lower resistance at $270-$270.50 was breached but held with continued closes above the latter getting $271.50-$272 and the 200-day moving average in play.

Rising support is at $268-$267.50. A move back below the latter reopens risk towards $265 and would signal a near-term top.

RSI is in an uptrend with resistance at 65-70 and the latter representing the September peak.

A move above this level would signal additional strength towards 75-80 and slightly overbought levels.

Current support is at 60-55 with a move below 50 being a bearish signal.

The Energy Select Sector Spider (XLE) extended its winning streak to 3-straight sessions with the intraday high reaching $64.07.

Prior and upper resistance from mid-month at $63.50-$64 was challenged but held on the close above the former.

Continued closes above the latter would be a bullish signal for a run towards $66-$67 and late November hurdles.

Current support is at $63-$62.50 with a close below $62 and the 50-day moving average being a slightly bearish development.

RSI is back in a slight uptrend with major resistance from mid-month at 60.

Continued closes above this level would signal additional momentum towards 65-70 and September/ October highs.

Support is at 55-50 with a move below the latter signaling additional weakness.

All the best,
Roger Scott.