U.S. markets opened strong following weekend developments of a trade truce with China.
The U.S. held off on additional tariffs for the time being and eased certain restrictions which helped fuel the rally.
However, the fade afterwards was a bit of a concern with the small-caps briefly falling into negative territory.
Despite the action, the higher close across the board was a bullish signal with fresh all-time highs coming into play. Volatility also closed below a key level of support after falling nearly 7%.
The Nasdaq was up for the 4th-straight session after rising 1.1% and trading to a high of 8,150.
Fresh and lower resistance at 8,150-8,200 was tapped but held with the all-time high at 8,176.
The S&P 500 soared 0.8% after trading to an all-time peak of 2,977 shortly after the opening bell.
New and lower resistance at 2,975-3,000 held with on the close back above the 2,950 level.
The Dow gained 0.4% while kissing a morning top of 26,890. Near-term and lower resistance at 26,600-26,850 was cleared and held with the all-time record high at 26,951.
The Russell 2000 extended its winning streak to 4-straight sessions after adding 0.2% while reaching a peak of 1,586 on the open.
Lower resistance at 1,585-1,600 was tripped but held on the 2nd-straight close below the 1,575 level.
Financials and Consumer Discretionary led sector strength after rallying 1.2% and 0.9%, respectively.
Utilities and Real Estate were the only sectors that closed in negative territory after falling 0.3% and 0.2%, respectively.
Global Economy – European markets closed higher despite disappointing economic news.
Germany’s DAX 30 and UK’s FTSE 100 rose 1%. The Belgium20 advanced 0.9% and the Stoxx 600 rose 0.8%. France’s CAC 40 was up 0.5%.
UK June Manufacturing PMI checked in at 48, versus 49.4 in May, and the lowest reading since February 2013.
Asian markets rallied on the China and U.S. trade truce although Chinese media is reporting that it will face a long road before they can reach a deal.
China’s Shanghai surged 2.2% and Japan’s Nikkei were lower by 2.1%. Australia’s S&P/ASX 200 added 0.4% and Hong Kong’s Hang Seng was up 0.3%. South Korea’s Kospi bucked the trend after slipping 0.1%.
China’s factory PMI for June was at 49.4, versus expectations for a print of 50.
PMI Manufacturing Index for June was at 50.6, topping expectations of 50.1. The employment sub-index fell to 50.8 versus 51.9 in May, and is the lowest since August 2016.
The report noted uncertainty surrounding future output growth weighedon hiring decisions among goods producers.
ISM Manufacturing Index for June came at 51.7, topping estimates of 51.1. The employment component rose to 54.5 from 53.7 while production increased to 54.1 versus 51.3.
New orders fell to 50 from 52.7. New export orders declined to 50.5 from 51.0 while imports rose to 50 from 49.4. Prices paid tumbled to 47.9 from 51.3.
Construction Spending for May was down -0.8%, missing forecasts for a gain of 0.1% for the month. Residential spending dipped 0.6%, as it did in April -0.5%.
Nonresidential spending fell 0.9% versus the 1.1% jump in April. Private spending fell -0.7% versus the prior -1% decline. Public spending was off -0.9% versus the 4.5% surge in April.
Market Sentiment- The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd-straight session following the intraday pullback to $131.59.
Near-term and upper support at $131.50-$131 held with risk towards $130.50-$130 on a move below the latter.
Lowered resistance is at $132.50-$133.
Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) was up for the 2-straight session after trading to an intraday high of $268.75.
Prior and lower resistance from late June at $267.50-$268 held with the recent all-time high at $268.96. There is upside potential towards $270-$272.50 on continued closes above the $269 level.
Rising support is at $266.50-$266.
A close below $265 would signal a possible near-term top with risk towards $263-$262.50.
RSI is in an uptrend resistance at 70 and last month’s peak.
Continued closes above this level keeps February highs at 75 in focus but signaling overbought levels. Support is at 65-60.
The Energy Select Sector Spider (XLE) broke out of a mini 7-session trading range following the intraday run to $64.71.
Prior and lower resistance throughout May and last week at $64-$64.50 was cleared but held. A close above the latter and the 200-day moving average would be a bullish development for continued strength towards $65.50-$66.
Near-term support is at $63.50-$63.
A close below the latter and the 50-day moving average would be a renewed bearish development with downside risk towards $62-$61.50.
RSI is in an uptrend with late May resistance at 60.
Continued closes above this level would be an ongoing bullish signal with additional strength towards 65-70. Support is at 55-50.
All the best,
Roger Scott.