U.S. markets showed strength on Thursday following two prior sessions of choppy action. Optimism over potential tax reform benefits along with a number of positive economic reports helped sentiment with near-term resistance holding.

The Russell 2000 led the way higher after rising 0.5% and coming within 8 points of its record high just south of 1,560. The Dow and S&P 500 advanced 0.2% but fell shy of their record highs by 26 and 2 points, respectively.

Both remain on track to trip 25,000 and 2,700 on continued momentum. Meanwhile, the Nasdaq climbed 0.1% but failed clearing the 7,000 level for the third-straight session.

Energy surged 2.2% and was easily the sector leader while Financials jumped 0.9%. Utilities sank 1.2% after trading lower for the 6th-straight session to lead sector weakness.

Global Economy- European markets closed higher across the board with UK’s FTSE 100 rising 1.1% to settle at a fresh record close and above its previous all-time from early November.

France’s CAC 40 and the Stoxx Europe 600 rose 0.6% while Germany’s DAX 30 was higher by 0.3%. The Belgium20 added a point, or 0.03%.

The UK December GfK consumer confidence unexpectedly fell 1 to a 4-year low of minus 13, weaker than expectations of no change.

UK November public sector net borrowing increased by 8.1 billion pounds, weaker than expectations of 8.3 billion pounds, but still the most in 7 months.

Asian markets were mixed after the Bank of Japan stuck to its aggressive monetary easing and offered no indication it was considering policy changes. Hong Kong’s Hang Seng bounced 0.5% and China’s Shanghai was up 0.4%. South Korea’s Kospi sank 1.7% while Australia’s S&P/ASX 200 fell 0.3%. Japan’s Nikkei slipped 0.1%.

The BOJ in an 8-1 vote maintained their policy rate at -0.1% and kept a target of 0% for 10-year government bond yields. BOJ Governor Kuroda said there’s no need to reconsider the current policy framework.

Gross Domestic Product for the third quarter saw the growth estimate trimmed to 3.2% from 3.3%, where it had been expected it would remain.

Initial jobless claims rose 20,000 to 245,000 first-time claims last week, topping expectations of 234,000.

The Philly Fed bounced to 26.2 in December from 22.7 in November, topping expectations for a pullback to 22.

The Chicago Fed National Activity index fell to 0.15 in November after rising to 0.76 in October and below forecasts for a drop to 0.20.

Corporate Profits After-tax were up 7.7% for the year.

The FHFA home price index rose 0.5% to 254.7 in October, better than expectations for a rise of 0.4% to 254.

The leading indicators index rose 0.4% to 130.9 in November, besting consensus for a gain of 0.3% for the month.

Market Sentiment-,The iShares 20+ Year Treasury Bond ETF (TLT) rebounded following a three-session slide after testing a high of $124.86.

Near-term resistance at $125-$125.50 and the 50-day moving average held. Support is at $124-$123.75 with risk to $123.25-$123 and the 200-day moving average on a close below the latter.

 

Market Analysis- The Spiders Dow Jones Industrial Average ETF (DIA) traded to an all-time intraday high of $248.54 to start the week with fresh resistance at $248.50-$249 holding.

Today’s high reached $248.29. Rising support is at $247-$246.75 with a move below the latter likely leading to a further backtest towards $245-$242.50.

RSI recently peaked near late November resistance around 80 and has been holding throughout the month. Continued closes above this level would be slightly bullish but would be approaching continued overbought levels.

Support is at 75-70 with a move below the latter signaling additional weakness.

 

The Energy Select Sector Spider (XLE) is trying to hold a double-top breakout above $70-$70.25 with continued closes above $70.50 being a bullish development.

Today’s high tapped $72.03 with fresh resistance at $72-$72.50. The 52-week high is at $76.81. Rising support is at $71.50-$70.50 and will try to hold on a pullback.

RSI cleared 70 on today’s jump with continued closes above this level leading to a possible run at September/ October resistance in the 80 area.

 

All the best,
Roger Scott