U.S. markets bounced back after the holiday weekend, propelled higher by Italy relaxing its stance on the budget impasse with the EU and hopes for a trade deal between the U.S. and China later this week at the G20 meeting.
Oil prices rebounded to close near $52 a barrel following Friday’s plunge towards $50.
Meanwhile, volatility closed below key levels of support but faces additional hurdles before signaling a possible market bottom.
The Nasdaq soared 2.1% after making a late day run 7,083.
Resistance at 7,100-7,150 held with a close above the latter being a slightly bullish signal. However, a death cross is close to forming in the index with the 50-day moving average just 4 points away from falling below the 200-day moving average.
The S&P 500 surged 1.6% following the intraday run to 2,674.
Upper resistance at 2,650-2,675 was challenged with both levels holding into the closing bell.
The Dow zoomed 1.5% after trading to a high of 24,673.
Prior and lower resistance at 24,600-24,800 was cleared and held with a close above the latter being a continuing bullish signal.
The Russell 2000 rallied 1.2% while reaching an intraday peak of 1,510.
Lower resistance at 1,500-1,515 was cleared with continued closes above the latter being a slightly bullish signal.
Technology and Communication Services gained 2.3% to pace sector leaders. Consumer Discretionary added 2.2% and Financials advanced 2%.
There were no sector laggards.
Global Economy – European markets closed higher across the board after the European Union approved the Brexit withdrawal deal laid out by U.K. Prime Minister Theresa May.
Although the backing from the EU shows progress for May’s withdrawal agreement, the deal still needs parliamentary approval.
Germany’s DAX 30 rose 1.5% while UK’s FTSE 100 and the Stoxx 600 Europe were up 1.2%. France’s CAC 40 and the Belgium20 climbed 1%.
The German November IFO business climate slipped 0.9 to 102, weaker than expectations of 102.3.
The ECB’s Chief Economist Praet said factors related to protectionism, financial market volatility and vulnerabilities in emerging markets are creating headwinds that are becoming increasingly noticeable.
Asian markets settled mixed ahead of the highly anticipated meeting between President Xi Jinping and President Donald Trump at the upcoming G-20, which is scheduled to happen at the end of this week.
Hong Kong’s Hang Seng jumped 1.7% and South Korea’s Kospi were higher by 1.2%.
Japan’s Nikkei gained 0.8% while Australia’s S&P/ASX 200 declined 0.8%. China’s Shanghai slipped 0.1%.
The Japan November Nikkei manufacturing PMI fell 1.1 to 51.8, the slowest pace of expansion in 2 years.
Chicago Fed National Activity Index for October edged up 0.1 to 0.24, topping forecasts of 0.20. The 3-month moving average climbed to 0.31 from the prior 0.30.
The diffusion index improved to 0.32 from 0.24. According to the report, 50 of the 85 monthly indicators made positive contributions, while 35 made negative contributions.
However, the employment-related category was the only one of the four broad categories that increased.
Dallas Fed Manufacturing Survey for November plunged 11.8 to 17.6, well below forecasts of 28.6. The employment index dropped to 15.9 versus 23.9, while the work week fell to 4.9 from 6.5.
Wages slid to 24.9 from 32.9. The new orders index sank to 9.7 from 18.9. Prices paid declined to 33.7 from 54.4.
Prices received declined to 7.5 from 17.5. The 6-month index fell to 25.7 from 35.6, with the future employment gauge at 42.0 from 32.8, wages at 44.8 from 51.4, with prices paid at 36.2 from 42.1 and prices received at 29.2 from 27.1.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) traded in negative territory throughout the session with the low reaching $114.78.
Lower support at $115-$114.50 and the 50-day moving average held with a close below the latter signaling a possible near-term top.
Resistance remains at $115.50-$116.
Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) was up for the 2nd time in 3 sessions after tapping a high of $246.73.
Resistance at $247-$247.50 held with more important hurdles at $248.50-$249 and the 200-day moving average.
Support is at $245-$244.50. A move back below the latter would be a slightly bearish signal with risk towards $242.50-$240 and late October lows.
RSI is in an uptrend with resistance at 45-50. Continued closes above the latter would signal additional strength towards 55-60. Support is at 40-35.
The Industrials Select Sector Spider (XLI) traded higher for just the 2nd time in 6 sessions after reaching a peak of $70.66. Lower resistance at $70.50-$71 was breached but held into the closing bell.
The latter represents late June and early July support. Continued closes above $71 would be a slightly bullish development. However, a death cross has formed with the 50-day moving average falling below the 200-day moving average.
This is typically a bearish signal for upcoming lower lows.
Near-term support is at $69-$68.50. A move below the latter would be a slightly bearish signal with risk towards the late October low at the $67 level.
RSI is approaching resistance at 45 with a move above this level signaling additional strength towards 50.
Support is at 40-35 with a move below the latter signaling additional weakness.
All the best,
Roger Scott.