U.S. markets showed continued strength on Tuesday following word a bipartisan deal has been reached to avert another government shutdown.

However, President Trump wasn’t too thrilled and is undecided on the budget deal after meeting with cabinet members.

News on trade also helped the major indexes push fresh highs for the year, aside from the blue-chips, after Trump said he wants to meet China’s President Xi very soon. Meanwhile, volatility tapped a new low for 2019 while closing below key levels of support.

The Dow darted 1.5% higher after reaching an intraday peak of 25,458 while snapping a 4-session slide.

Prior and lower resistance at 25,250-25,000 was nearly breached but held with a move above the latter being a continuing bullish signal.

The Nasdaq also jumped 1.5% after trading to a late day high of 7,419.

Upper resistance at 7,350-7,400 was cleared and held to setup a run towards 7,450 and the 200-day moving average.

The S&P 500 soared 1.3% following the 2nd half run to 2,748.

Major resistance at 2,750 and the 200-day moving average held into the closing bell with continued closes above the latter setting up a run towards 2,775-2,780.

The Russell 2000 also rose 1.3% following push to 1,538 shortly after the closing bell. Fresh resistance is at 1,540-1,550 on continued closes above 1,525-1,515 with a move below the latter signaling caution.

Materials showed the most sector strength after after rallying 2.2%.

Industrials gained 1.6% while Consumer Discretionary and Financials were higher by 1.5%.

Real Estate was the only sector laggard after falling 0.7%.

Global Economy – European markets ended higher across the board after U.K. Prime Minister Theresa May updated lawmakers on the latest Brexit developments.

May said she needed some time to complete the process with the EU but that lawmakers will be able to vote on the Brexit process by February 26th.

Germany’s DAX 30 jumped 1% and the Belgium20 added 0.9%.

France’s CAC 40 advanced 0.8% and the Stoxx 600 Europe was higher by 0.5%. UK’s FTSE 100 edged up 0.1%.

Asian markets closed higher as traders considered the possibility of a trade deal being struck between the U.S. and China.

Officials from Washington and Beijing will continue talks throughout the week with a focus on intellectual property.

Japan’s Nikkei zoomed 2.6% while bouncing off a 1-month low.

China’s Shanghai surged 0.7% and South Korea’s Kospi gained 0.5%. Australia’s S&P/ASX 200 was up 0.3% and Hong Kong’s Hang Seng advanced 0.1%.NFIB Small Business Optimism Index dropped 3.1% to 101.2 in January after sliding 0.4% to 104.4 in December, and represents the 5th-straight monthly decline.

It’s also the lowest print since the months leading up to the 2016 election. The index is down from the record high of 108.8 hit last August but well above the historical average of 98.

Slippage was broad based as the percentage of those expecting a better economy fell to 6% from 16% while plans to hire slid to 18% from 23% in December.

One of the few components that rose was increased capital spending which improved to 26% from 25%.

Redbook Sales were up 4.6% for the year in the week ending February 9th.

Weekly chain store sales bounced 0.9% in the week of February 9th, after falling 1.5% in the previous week. The 12-month pace slowed to 1.6% year-over-year versus 2.6% previously.

The report noted that while the weekly pace has been choppy and that the trends seem to be softer than in 2018.

The Jolts reported showed job openings rose 169,000 to 7,335,000 in December, topping estimates of 6.9 million, and follows the 35,000 rise to 7,166,000 in November.

The rate climbed back to the record high of 4.7%, hit back in August, from 4.6%. Hirings rebounded 95,000 to 5,907,000 following the 116,000 decline to 5,812,000.

The rate was steady at 3.9%. Quitters declined 12,000 to 3,482,000 after dropping 25,000 to 3,494,000 from the previous month. The rate was also unchanged at 2.3%.

Market Sentiment – Fed Chairman Powell said the economy is good and added that the unemployment rate is near a 50-year low.

Noting the policy lags, he said that it takes quite a while for changes in interest rates to affect the economy.

Powell went on to say the Fed knows that prosperity has not been felt as much in some areas, including many rural places.

He said the Federal Reserve can help by carrying out its monetary policy mission of supporting maximum employment and price stability.

The iShares 20+ Year Treasury Bond ETF (TLT) fell for the 2nd-straight session following the backtest to $121.20.

Support at $121.50-$121 was split on the close above the former. A move below the latter gets $120-$119.50 and the 50-day moving average back in play.

Resistance remains at $122-$122.50.

Market Analysis – The Russell 2000 ETF (IWM) extended its winning streak to 3-straight sessions after reaching a peak high of $153.19. Prior resistance from the last session in November at $153-$153.50 was challenged but held by a hair.

Continued closes above the latter would be a bullish signal for a possible run towards $155-$157 and the 200-day moving average.

Near-term support is at $152-$151.50 with a close below $150 being a slightly bearish development and signaling a possible near-term peak.

RSI is approaching prior resistance from earlier this month near 70.

A move above this level could lead towards a run at 75 and the mid-June peak. Support is 65-60 with a move below the latter signaling additional weakness.

The Spider Gold Shares (GLD) has been in a 7-session trading range with Tuesday’s top tapping $124.03. Prior resistance at $124-$124.50 held. A close above $125 would signal renewed strength and a possible breakout towards $127-$129 and fresh 52-week highs.

Near-term support is at $123.50-$123. A move below the latter would be a slightly bearish development with risk towards $122-$120 and the 50-day moving average.

A golden cross formed last month with the 50-day clearing the 200-day moving average. This is typically a bullish signal for higher highs.

RSI is back in a slight uptrend with resistance at 60.

A move above this level would signal additional strength towards 65-70 with the latter representing the late January high just north of the level. Support is at 55-50.

All the best,
Roger Scott.