U.S. markets started the week by setting fresh all-time highs, excluding the Russell 2000, while closing mixed to end the session. The Dow reached a record peak just south of 23,639 while holding positive territory.

The S&P 500 tapped 2,606 while closing above the 2,600 for the second-straight session after giving back a point.

The Nasdaq came with 3 points of clearing the 6,900 level but had its 4-session winning streak snapped after closing slightly lower. Meanwhile, the Russell 2000 opened higher but failed its all-time high by 2 points after stalling at 1,522 and finishing slightly in the red with a 0.4% loss.

Utilities showed the most sector strength after rising 0.4%. Energy took it on the chin after tumbling 1% while Materials stumbled 0.6% to lead sector laggards.

Global Economy- European markets closed lower despite signs political risks in Germany are easing after the SPD party said it will join Chancellor Merkel’s Christian Democratic party to form a Grand Coalition. France’s CAC 40 fell 0.6% while Germany’s DAX 30 and the Stoxx Europe 600 declined 0.5%. UK’s FTSE 100 and the Belgium20 sank 0.4%

Asian markets were weak with China’s Shanghai falling 0.9% while tumbling to a 3-month low on concerns over the government’s attempt to tighten liquidity in Chinese large-cap stocks.

South Korea’s Kospi tanked 1.4% and Hong Kong’s Hang Seng tumbled 0.6%. Japan’s Nikkei declined 0.2% while
Australia’s S&P/ASX 200 gained 0.1%.

Japan October PPI services prices rose 0.8% year-over-year, weaker than expectations for a gain of +0.9%.

China October industrial profits jumped 25.1% year-over-year with January-October industrial profits up 23.3% year-over-year.

New Home Sales rose 6.2% to a 10-year high rate of 685,000 units in October, versus expectations for a 10% decrease to a 600,000 unit pace.

The November Dallas Fed manufacturing index fell 8.2 points to 19.4, more than erasing the 6.3 point increase to 27.6 in October. Expectations were for a print of 24.5.

The employment component plunged to 6.3 after a 0.4 point gain to 16.7 previously, with hours worked at 11.5 from 13.7 and wages at 14.2 from 22.5.

U.S. e-commerce spending will jump 17% to $6.6 billion on Cyber Monday from a year ago, according to Adobe Systems estimates, while on-line holiday season shopping is on track to rise to $107 billion to capture 11% of the total spend, according to EMarketer.

Other reports suggested that Amazon claimed nearly 50% of all Black Friday on-line sales and is forecast to take nearly half of the growth in on-line holiday spending as well. Meanwhile, ShopperTrak reported in-store traffic sank roughly 1%.

Market Sentiment- Dallas Fed’s Robert Kaplan worries that rising imbalances threaten the expansion, as well as the Fed’s goals. In published comments, he said he backs a rate hike in the near future and supports a gradual and patient approach to removing accommodation.

He estimates the neutral rate in the neighborhood of 2.5%, which is below the 2.75% from the FOMC’s September meeting. He’s mindful of waiting too long for inflation to manifest and hence getting behind the curve.

He believes the job market will become increasingly overheated in the months ahead while saying low stock market volatility is extraordinarily unusual.

The iShares 20+ Year Treasury Bond ETF (TLT) tested an intraday high of $127.05 with lower resistance at $127-$127.50 holding. Support remains at $126.50-$126.25 with a move below the latter being a bearish signal.

 

Market Analysis- The Russell 2000 ETF (IWM) made a run to $151.62 but failed its all-time high of $151.77 that was tapped last Wednesday. Resistance is at $151.75-$152 with continued closes above the latter getting $153-$155 in play.

Short-term support is at $150-$149.50 with a move below the latter likely leading to additional weakness.

RSI recently failed mid-October resistance near the 70 level and is in a slight downtrend. Support is at 60 with a move below this level being a bearish signal.

 

The iShares PHLX Semiconductor ETF (SOXX) traded to an all-time high of $181.88 last Wednesday and $181.87 during Friday’s shortened session to form a temporary short-term double top.

Resistance is at $180-$180.25 following today’s backtest to $179.17. Current support is at $179-$178.50 with a move below $177.50 leading to further weakness.

RSI has been trying to hold resistance at the 70 level throughout the month but is back in a downtrend. Support is at 60 with risk to 50 on a move below this level.

 

All the best,
Roger Scott