U.S. markets showed strength throughout Thursday’s session while settling the week mostly higher. The small-caps struggled and closed on the opposite side of the action after testing a lower low to end the shortened week lower.
Much of the news was dominated by the DOJ’s redacted version of the Mueller report with the market more focused on ongoing U.S. / China trade negotiations and all-time highs.
Volatility closed back below major support with a downtrending 50-day moving average still intact.
The Dow rose 0.4% after trading to a fresh 2019 high of 26,602.
Fresh and lower resistance at 26,500-26,750 was cleared and held with a close above the latter getting 27,000 and all-time highs in play.
The S&P 500 climbed 0.2% following the push to 2,908 and close above the 2,900 level for the 5th-straight session.
Major resistance remains at 2,925 with the current all-time peak just north of 2,940 and a move above this level getting 2,950-2,975 in play.
The Nasdaq was up 2 ticks, or 0.02% after tapping a high of 8,002. Prior and major resistance from late September at 8,000 was cleared but held by 2 points with a continued closes above this level keeping 8,100-8,150 and all-time highs in the mix.
The Russell 2000 dipped nearly 2 points, or 0.1%, while testing a session low of 1,556.
Major support at 1,550 and the 50-day moving average held with a move below this level being a near-term bearish development.
For the shortened week, the Dow was up 0.6% and the Nasdaq advanced 0.2%.
The Russell 2000 tumbled 1.2% while the S&P 500 slipped just over 2 points, or 0.1%.
Industrial led sector strength on Thursday after jumping 1.2% while Real Estate rose 0.8%.
Energy fell 0.5% while Financials and Consumer Discretionary gave back 0.3% and 0.03% to round out the sector laggards.
Global Economy – European markets finished mostly in the green despite lackluster economic news from the region.
Germany’s DAX 30 was higher by 0.6% and France’s CAC 40 added 0.3%.
The Stoxx 600 Europe gained 0.2% and the Belgium20 edged up 0.1%. UK’s FTSE 100 fell 0.2%.
Germany’s IHS Markit Purchasing Managers’ Index for April was up slightly to 44.5 from 44.1 in March, missing expectations for an increase to 45.
France manufacturing PMI dipped 0.1 to 49.6 from 49.7, missing forecasts for a rise to 50. For the EU overall, the index posted narrow gains, rising to 47.8 from 47.5, and below expectations of 47.9.
UK Retail Sales surged by the most in over 2 years, zooming by 6.7%, and well above all forecasts.
The Bank of England said banks reported they cut back on the availability of consumer credit in early 2019 and expected more tightening in the second quarter.
Asian markets closed mostly lower following disappointing PMI numbers out of Japan.
South Korea’s Kospi sank 1.4% and Japan’s Nikkei declined 0.8%. Hong Kong’s Hang Seng dropped 0.5% and China’s Shanghai was down 0.4%. Australia’s S&P/ASX 200 nudged up 3 points, or 0.05%.
Japan’s Manufacturing Purchasing Managers Index rose to a seasonally adjusted 49.5 in April from a final 49.2 in March but remained below the 50 threshold that separates contraction from expansion for a 3rd-straight month.
Australia’s labor force added 25,700 jobs in March, well above forecasts for a gain of 12,000.
Initial Jobless Claims declined 5,000 to 192,000, marking another fresh 49-year low, versus forecasts for a reading of 206,000. The 4-week moving average was at 201,250 from 207,250. Continuing claims checked in at 1,653,000 versus 1,716,000 previously.
Philadelphia Fed Business Outlook Survey sank 5.2 points to 8.5 in April, after surging 17.8 points to 13.7 in March, and missing forecasts for a print of 10.2. Employment increased to 14.7 from 9.6, with the workweek at 11.2 from 10.6.
New orders climbed to 15.7 from 1.9 while inventories dropped back to 2.6 after surging to 17.2 in March.
Prices paid edged up to 21.6 from 19.7, with prices received dipping to 20 from 24.7. The 6-month outlook slipped further to 19.1 from 21.8 and is the lowest since February 2016.
Retail Sales rebounded 1.6%, and were up 1.2% excluding autos, stronger than forecast for gains of 0.9% and 0.8%, respectively. Sales excluding autos, gas, and building materials climbed 1% from -0.3%. Vehicles/parts sales increased to 3.1% from -0.1% with gas station sales climbing another 3.5%.
Clothing rebounded 2% from -1.8%. Other big movers included miscellaneous sales (1.8%), furniture (1.7%), and non-store retailers (1.2%).
PMI Services Index was unchanged at 52.4 in April, versus forecasts of 52.2, and follows the 0.6 points dip to that level in March. However, both output and new orders rose.
The services index dropped 2.4 points to 52.9 after falling 0.7 ticks to 55.3. The composite declined 1.8 ticks to 52.8 after dipping 0.9 points to 54.6 in March.
Business Inventories rose 0.3% in February, with sales up 0.1%, matching expectations. For inventories, they were firmer across the board led by retailers (0.3%) and autos (0.3%).
The inventory-sales ratio was steady at 1.39 for a 3rd-straight month.
Leading Indicators gained 0.4% to 111.9 in March, a new record high level, following February’s 0.1% increase to 111.5. The report saw 8 of 10 components make positive contributions in March, while 2 were flat and none were negative.
Jobless claims, consumer goods orders, ISM new orders, stock prices, leading credit index, interest rate spread, consumer expectations and nondefence capital goods ex-aircraft all made positive contributions.
The average workweek and building permits were flat.
Baker Hughes reported the U.S. Rig Count was down 10 rigs to 1,012, with oil rigs down 8 to 825, gas rigs down 2 to 187, and miscellaneous rigs unchanged at 0.
The U.S. Rig Count is down 1 rig from last year’s count of 1,013, with oil rigs up 5, gas rigs down 5, and miscellaneous rigs down 1. The U.S. Offshore Rig Count was unchanged at 23 and is up 5 rigs year-over-year.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd-straight session following the intraday run to $123.10. Fresh and lower resistance at $123-$123.50 was breached but held with a move above $124 being a more bullish development.
Current support is at $122.50-$122 and the 50-day moving average with backup help at $121.50-$121.
RSI is in a slight uptrend with resistance at 50.
A move above this level would signal additional strength towards 55-60 with the latter representing the monthly peak. Support is at 45-40.
Market Analysis – The Spider Small-Cap 600 ETF (SLY) fell for the 2nd-straight session and 3 of the past 4 after trading to an intraday low of $68.01. Near-term and upper support at $68-$67.50 and the 50-day moving average held.
A close below $67 would be a bearish development with risk towards $66-$64.50 and late March support levels.
Current resistance is at $69-$69.50 and the 200-day moving average. A move above the latter would be a bullish development for a possible push towards $70-$70.50 and February peaks.
RSI has been in a downtrend but is trying to level out with support at 50.
A close below this level would signal additional weakness towards 45-40 with the latter representing the March low.
Resistance is at 60 with a move above this level signaling additional strength.
Communication Services (XLC) was up for the 7th time in 8 sessions with the intraday high tapping $49.25. Near-term and lower resistance from late September at $49-$49.50 held for the 4th time over the past 5 sessions.
A close back above the latter would be a bullish signal for a possible push towards $50-$50.50 and major hurdles from early July of 2018.
Current support is at $48.50-$48.
A move below the latter opens up risk towards $47-$46.50 and the 50/ 200-day moving averages. A golden cross formed earlier this month with the 50-day moving average clearing the 200-day moving average and is typically a bullish development.
RSI has been flatlining with resistance at 75 .
There is a chance a run towards 80 and the June 2018 high on a move above this level but still signaling overbought conditions. Support is at 70.
A close below this level would be a slightly bearish signal for additional weakness towards 65-60.
All the best,
Roger Scott.