U.S. markets were sluggish throughout Monday’s action after spending much of the session underwater despite ongoing and encouraging trade talks with China.
Top economic advisor of the White House, Larry Kudlow, said he expects a lot of teleconferencing to take place this week, with U.S. and China getting closer and closer to a trade deal.
Kudlow added the U.S. made good headway with Chinese Vice Premier Li last week and that they are closer than they have ever been before with the two sides making more than guarded optimism about the deal.
The mixed finish was slightly encouraging for continued market strength with volatility edging a tad higher but easily holding near-term resistance levels.
The Dow was down 0.3% following the intraday pullback to 26,246.
Near-term support at 26,250-26,000 was breached but held with a move below the latter being a slightly bearish signal.
The Russell 2000 was lower by 0.2% after testing a first half low of 1,571.
Fresh and upper support at 1,575-1,560 and the 200-day moving average was breached but held with risk towards 1,550-1,535 and the 50-day moving average on a move below the latter.
The Nasdaq was up 0.2% despite the backtest to 7,891 shortly after the opening bell.
Fresh and lower support at 7,900-7,850 was breached but held with a move below 7,800 signaling a possible near-term top.
The S&P 500 extended its winning streak to 8-straight sessions after edging up 0.1% while tapping a morning low 2,880.
Current and upper support at 2,875-2,850 easily held with a move below the latter being a slightly bearish signal.
Technology led sector strength after rising 0.4% while Energy, Consumer Staples and Consumer Discretionary gained 0.3%.
Utilities and Industrials paced sector laggards after falling 0.6% and 0.5%.
Global Economy – European markets closed mostly lower following weaker-than-expected economic data out of Germany.
Germany’s DAX 30 fell 0.4% and the Belgium20 was down 0.3%. France’s CAC 40 dipped 0.2% and the Stoxx 600 Europe slipped 0.1%. UK’s FTSE 100 edged up 0.1%.
German exports were down by 1.3% on the month, the biggest drop in a year, while imports fell 1.6%. Expectations were for a 0.5% decrease in exports and a 0.7% drop in imports. The trade surplus was expected to fall to 18 billion euros but edged up to 18.7 billion euros.
Eurozone investor sentiment index for April rose to -0.3 from -2.2 in March, topping forecasts for a decline of -2.1.
Asian markets were mixed following China’ announcement of more stimulus in an effort to support the economy.
China said it will step up its policy of targeted cuts to banks’ required reserve ratios to encourage financing for small and medium-sized businesses that play a key role in economic growth.
Australia’s S&P/ASX 200 rallied 0.7% and Hong Kong’s Hang Seng rose 0.5%.
South Korea’s Kospi added a point, or 0.04%. Japan’s Nikkei was off 0.2% and China’s Shanghai slid 0.1%.
Factory Orders fell 0.5% in February, better than expectations for a decline of -0.6%. The volatile transportation component dropped 4.5% after a 0.4% January increase.
Excluding transportation, orders were up 0.3% from -0.1%. Nondefense capital goods orders excluding aircraft dipped 0.1% after the prior 0.9% gain. Shipments rose 0.4% from -0.3%.
Nondefense capital goods shipments excluding aircraft were 0.1% lower too, from 1%.
Inventories increased 0.3% from 0.5% while the inventory-shipment ratio was steady at 1.36.
Atlanta Fed boosted its GDPNow cast to 2.27% for Q1.
TD Ameritrade IMX Level for March checked in at 4.65.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) fell for the first time in 3 sessions after testing a low of $123.52.
Upper support at $123.50-$123 held with risk towards $122-$121.50 and the 50-day moving average on a close below the latter.
Shares are currently in a 4-day holding pattern with resistance at $123.75-$124.25.
A close back above $124.50 would be a slightly bullish signal for additional strength.
Market Analysis – The Russell 3000 Index ($RUA) extended its winning streak to 4-straight sessions despite the pullback to 1,698 while closing above the 1,700 level for the 2nd-straight session.
Current and upper support at 1,700-1,685 held. The former served as prior support in mid-August and early September of last year.
A close below the 1,675 level would be a slightly bearish development with risk towards 1,650-1,635.
Near-term resistance from August 2018 at 1,710-1,725 held on the rebound to 1,707 ahead of the closing bell.
A move above the latter gets 1,735-1,750 and all-time highs in the mix.
A golden cross has formed with the 50-day moving average recently clearing the 200-day moving average. This is typically a bullish signal for higher highs.
RSI has been in an uptrend with resistance at 70. Continued closes above this level would signaling additional strength towards 75-80 and January 2018 highs.
The Consumer Staples Select Spiders (XLP) extended its winning streak to 3-straight sessions after trading to an intraday peak of $55.83. Prior resistance from late March at $55.75-$56 was cleared and held.
Continued closes above the latter would signal a possible run towards $56.50-$57 and fresh 52-week peaks.
Near-term support is at $55.50-$55.25 with a move below double-nickels opening up risk towards $54.50-$54 and the 50-day moving average.
RSI is in an uptrend with resistance at 70-75 and the latter representing the March high.
A close above the latter could lead to continued strength towards 78-80 and January 2018 highs. Support is at 60-55 with a move below the latter signaling additional weakness.
All the best,
Roger Scott.