U.S. markets showed strength on Monday’s open after President Trump said he spoke on the phone with Chinese President Xi Jinping and that trade negotiations were moving along very well as they made big progress toward cutting a deal.

The current rebound and historic Santa rally could last into the New Year as Wall Street comes back from vacation and prepares for the upcoming 4Q earnings season.

Volatility continues to show bullish signs after falling for the 4th-straight session but remains slightly above key levels of support.

The Dow got back on track after soaring 1.2% and testing a high of 23,333.
Upper resistance at 23,200-23,400 was challenged for the 2nd-straight session on the close above the former with a move above 23,500 signaling additional strength.

The S&P 500 rose 0.9% after trading to a high of 2,509. Lower resistance at 2,500-2,525 was cleared and held with a close above 2,550 being a more bullish development.

The Nasdaq closed in the green for the 4th-straight session after gaining 0.8% while reaching a peak of 6,659.

Resistance at 6,650-6,700 held for the 2nd-straight session with a close above the latter being a continuing bullish signal.

The Russell 2000 was also up 0.8% following the late day run to 1,348 and also extended its winning streak to 4-straight sessions.

Lower resistance at 1,350-1,365 held with a close above 1,375 being a more bullish development and confirming a possible near-term bottom.

Healthcare and Consumer Discretionary were the strongest sectors after rising 0.8% and 0.6%, respectively.

Financials and Industrials were higher by 0.4%.

Communication Services paced sector laggards after giving back 0.4%.

Real Estate was off 0.2% while Utilities and Energy dipped 0.1%.

Global Economy – European markets showed strength in shortened sessions with Germany’s DAX 30 closed ahead of the New Year holiday.

France’s CAC 40 and the Belgium20 jumped 1.1%.

The Stoxx 600 Europe was up 0.4% but ended the year down 13.2%. UK’s FTSE 100 slipped 0.1% to finish 2018 with a loss of 12.4%.

Asian markets settled mixed in limited trading as South Korea’s Kospi, China’s Shanghai and Japan’s Nikkei were closed for holidays.

Hong Kong’s Hang Seng jumped 1.3% while Australia’s S&P/ASX 200 slipped 0.1%.

The China December non-manufacturing PMI unexpectedly rose 0.4 to 53.8, stronger than expectations for a slid of 0.2 to 53.2.

The China December manufacturing PMI fell 0.6 to 49.4, missing forecasts of no change at 50.

The Dallas Fed Manufacturing Survey plunged 22.7 points to -5.1 in December after dropping 11.8 points to 17.6 in November.

The components were mixed, as the employment component fell to 11 from 15.9, though the workweek inched up to 5 from 4.9. Wages rose to 29.2 from 24.9.

New orders climbed to 14.4 from 9.7. Prices paid declined to 28.8 from 33.7, with prices received at 6.6 from 7.5.

The 6-month general business index was tumbled to 3.2 from 25.7, with employment at 28.2 and down from 42 and new orders at 32.4 from 47.8. Prices paid came in at 34.3 from 36.2, and prices received at 26.7 from 29.2.

The future capital expenditure gauge was at 24.7, down from 34.1.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 3rd-straight session after trading to an intraday high of $121.55.

The close above upper resistance at $121-$121.50 was a bullish development with a move above $122 being a signal for additional strength.

The 50-day moving average remains in a solid uptrend and is showing signs of clearing the 200-day moving average.

This would form a golden cross if this technical pattern plays out and is typically a bullish signal for higher highs.

Rising support is at $120.75-$120.25 with a move below $120 signaling a possible near-term top.

Market Analysis – The Russell 3000 Index ($RUA) closed higher for the 3rd time in 4 sessions after making an intraday run to 1,472.

Near-term resistance at 1,475-1,500 held with continued closes above 1,525 being a more bullish signal for higher highs.

Major support is at 1,450. A close below this level over the near-term would be a bearish development and signal a possible near-term top.

RSI is in a slight uptrend with resistance at 45.

A move above this level would signal additional strength towards 50-55. Support is at 35-30.

The Consumer Discretionary Select Spiders (XLY) was up for the 4th-straight session after tapping a high of $99.41. Fresh and lower resistance at $99.50-$100 held with more important hurdles at $102-$104 and the 50-day moving average.

Rising support is at $98-$97.50.

A close back below $97 would be slightly bearish and signal a possible near-term top.

RSI is in a slight uptrend with fresh resistance at 50.

A move above this level would be a bullish signal for a possible trip towards 55-60 and the late November peaks. Support is at 40.

All the best,
Roger Scott.