U.S. markets traded higher for a third-straight session after showing late afternoon strength following first half weakness.

The action remains slightly bullish as the major indexes continue to push near-term resistance levels.

The Nasdaq gained 0.5% after testing to an intraday high of 7,025 while closing back above the 7,000 level for the first time in four sessions.

The Russell 2000 advanced 0.3% after testing a high of 1,494 while failing near-term resistance at 1,500.

The S&P 500 rose 0.3% after making a run to 2,668 but the lower high than Monday’s 2,672 print was a slightly bearish development.

The Dow added 0.2% after trading up to 24,705 but remains over 1% away from clearing its 50-day moving average.

Energy and Materials were the only sector laggards after falling 0.4% and 0.3%, respectively. Real Estate was up 0.7% to lead sector strength followed by Utilities, Consumer Staples and Consumer Discretionary which were higher by 0.5%.

Global Economy – European markets closed lower across the board following inflation worries in the U.K. and strengthening the argument that borrowing costs need to rise to bring inflation back to its 2% annual goal.

The Belgium20 sank 0.9% and Germany’s DAX 30 fell 0.7%. The Stoxx Europe 600 and France’s CAC 40 gave back 0.6% while UK’s FTSE 100 dipped 0.1%.

UK January CPI slipped 0.5% month-over-month but was up 3% year-over-year, stronger than expectations for a drop of 0.6% and print of 2.9%, respectively.

January core CPI rose 2.7% year-over-year, ahead of forecasts of 2.6%.

The UK December house price index rose 5.2% year-over-year, topping expectations for a rise of 4.9%.

Asian markets settled mostly higher with Japan’s Nikkei bucking the trend after falling 0.7%. Hong Kong’s Hang Seng was up 1.3% and China’s Shanghai rallied 1%.

Australia’s S&P/ASX 200 climbed 0.6% and South Korea’s Kospi added 0.4%.

Japan January PPI was up 0.3% month-over-month and 2.7% year-over-year, slightly below expectations of 0.3% and 2.8%.

U.S. NFIB Small Business Optimism Index rose 2 points to 106.9 in January after falling 2.6 points to 104.9 in December. The January reading is just off the 107.5 print from November, which was the highest since 1986.

A record number 41% of respondents said it was a good time to expand, and that they expect the economy to improve, up from 37% in December.

U.S. household debt increased $193 billion, or 1.5%, to $13.15 trillion in the fourth quarter of 2017 and marked the fifth consecutive year of positive annual household debt growth.

There were increases in mortgage, student, auto, and credit card debt as they increased by 1.6%, 1.5%, 0.7% and 3.2% respectively.

U.S. chain store sales jumped 1.8% to 116.5 in the week ending February 10th, following the 1.9% drop in the prior week. Consumer staples paced the strength, led by grocery store sales, along with dollar and drug stores.

However, the 12-month pace slowed to 1.6% year-over-year, versus 2.7% previously, and represented the lowest rate since late November 2016.

Redbook Store Sales up 2.8% for the year in the week ending February 10th.

Market Sentiment – Fed Chairman, Jerome Powell, said the Fed will remain alert to any financial stability risks and pledged to preserve essential gains in financial regulation made since the crisis.

Cleveland Fed President, Loretta Mester, said further rate hikes will be appropriate this year and also supports the balance sheet normalization plan.

She went on to say the recent market turbulence has not changed her outlook on the economy, where she sees the fundamentals as very sound.

Mester also said trading has been fairly orderly and that tax reform should add to growth and upside risks. She expects inflation to gradually rise to 2% over the next year or two.

The iShares 20+ Year Treasury Bond ETF (TLT) traded higher for the second-straight session after testing an intraday high of $119.01 with lower resistance at $119-$119.50 holding by a penny into the close.

Support is at $117.50-$117 with a move below the latter signaling additional weakness to $116.50-$116 and fresh 52-week lows.

Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) traded higher for a 3rd-straight session following an intraday push to $247.25.

Lowered resistance at $247.50-$248 held with a move above the latter getting $250-$251 and the 50-day moving average in play. Support is at $245-$244 with a move below the latter being a bearish development for a continued backtest to lower lows.

RSI is trying to hold near-term support at 40 with continued closes above this level being a bullish signal for a possible push towards 50 and prior September support.

The Real Estate Select Sector Spider (XLRE) traded to a high of $30.48 intraday with near-term resistance is at $30.25-$30.50 holding. Support is at $30-$29.75 with a close below the latter signaling additional weakness.

RSI is in a slight uptrend with resistance at 40. Continued closes above this level would be a bullish development for a possible run towards 50.

However, the 50-day moving average remains in a downtrend and is poised to fall below the 200-day moving average over the near-term. This would form a death cross and is usually a bearish development for lower lows.

All the best,
Roger Scott