U.S. markets opened in positive territory and showed continued momentum throughout Tuesday’s session while pushing January resistance levels.
The strength was attributed to a continued solid 2Q earnings season as 82% of the S&P 500 companies that have reported have topped estimates.
This is higher than the 72% of companies that beat estimates during the same quarter last year.
The S&P ETF’s for small capitalization and mid-cap stocks broke out to fresh all-time highs, with the large-cap S&P 500 now within 1% of lifetime peaks.
The Dow, which has been a laggard over the past few sessions, was up 0.5% after making a run to 25,692. The close above resistance at 25,600 was a bullish signal for continued strength.
The S&P 500 extended its winning streak to 4-straight sessions after adding 0.3% and reaching a peak of 2,863. Lower January resistance at 2,870-2,875 held with the all-time high just south of 2,873.
The Nasdaq closed higher for the 6th-straight session after gaining 0.3% and tapping 7,898 intraday.
Lower resistance at 7,900-7,925 held with a move above the latter getting fresh all-time highs up to 7,950-8,000 in play.
The Russell 2000 climbed 0.2% following its morning push to 1,694. Fresh resistance is at 1,690-1,700 with a move above the latter also signaling a test towards 1,710-1,715 and new record highs.
Industrials and Energy led sector strength after rising 0.7%. Consumer Discretionary and Financials advanced 0.5%
Consumer Staples paced sector laggards after falling 0.6%. Real Estate and Utilities were off 0.2%.
Global Economy – European markets were higher across the board on stronger-than-expected German trade data.
France’s CAC 40 gained 0.8% and UK’s FTSE 100 climbed 0.7%. The Stoxx 600 Europe and the Belgium20 added 0.5% while Germany’s DAX 30 rose 0.4%.
The German June trade balance was in surplus by 21.8 billion euros, wider than expectations of 20.9 billion euros.
June exports were unchanged, topping forecasts for a dip of 0.3%. June imports rose 1.2%, stronger than estimates for a rise of 0.3%.
German June Industrial Production fell 0.9%, weaker than expectations for a drop of 0.5%.
Asian markets were mostly higher on reports China’s government will boost fiscal measures to spur domestic economic growth.
China’s Shanghai zoomed 2.7% and Hong Kong’s Hang Seng surged 1.5%.
Japan’s Nikkei rallied 0.7% and South Korea’s Kospi advanced 0.6%.
Australia’s S&P/ASX 200 gave back 0.3%.
The China Business Journal reported that rail investment this year may be higher than originally planned and the China Daily cited an unidentified official at the National Development and Reform Commission who said the government would roll out more policies to boost investment.
Japan June labor cash earnings rose 3.6% year-over-year, ahead of forecasts of 1.7% and the largest increase in over 20 years.
June real cash earnings rose 2.8% year-over-year, stronger than expectations of 0.9% and also the biggest increase in 20 years.
Japan household spending fell for a 5th-straight month after dropping 1.2% year-over-year in June, but better than expectations for a decline of 1.4%.
U.S. JOLTS showed job openings edged up 3,000 to 6,662,000 in June after falling 181,000 to 6,659,000 in May. Expectations were for a print of 6,650,000.
The rate was unchanged at 4.3%. Hirings declined 96,000 to 5,651,000 following May’s 166,000 increase to 5,747,000. The rate dipped to 3.8% from 3.9%. Quitters fell 78,000 to 3,402,000 versus the 131,000 rise in May to 3,480,000. The rate was steady at 2.3%.
U.S. weekly chain store sales rose 1.4% in the week ending August 4th, following the prior week’s 0.1% gain. The 12-month pace slowed, however, slipping to a 2.6% year-over-year rate versus 3.5%.
Back-to-school buying, supported by tax holidays in 12 states, provided motivation for shoppers.
Redbook Store Sales up 5.6% for the year in the week of August 4th.
Consumer Credit rose $10.2 billion in June after climbing $24.3 billion in May and well below estimates of $16 billion.
Non-revolving credit increased $10.4 billion versus $14.7 billion previously. Revolving credit fell $0.2 billion to $9.4 billion.
The U.S. IBD/TIPP Economics Optimism Index was up 1.6 points to 58 in August, from July’s 56.4, and easily beats the 13-year high of 56.7 from February.
It was the strongest reading since January 2004. The economic outlook component jumped to 56.8 from 53.4. The personal finances index improved to 65.1 versus the prior 62.8 and it’s the second best print over the 18 years of the survey.
The outlook on Federal policies declined to 52.1 after surging 4.6 points to 52.9 in July, with popularity among Republicans (79.6%) and much less so from Democrats (24.8%).
Independents have climbed to 51.2, the highest in over a decade.
The 6-month economic index rose 3.4 points to 56.8, just below the 13-year high of 57.5 from February.
The 6-month personal finances index increased 2.3 points to 65.1 and is just below the all-time high of 65.3 from January 2004.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) fell for the first time in 4 sessions following the backtest to $118.57.
Lower support at $118.50-$118 held with a close below the latter being a bearish development. Lowered resistance is at $119-$119.50.
Market Analysis – The Spider S&P 500 ETF (SPY) extended its winning streak to 4-straight sessions after reaching an intraday peak of $286.01. January resistance at $286-$286.50 held with the all-time high at $286.63.
Continued closes above these levels could lead to a run towards $287.50-$290.
Rising support is at $285.25-$284.75 with a move below the latter signaling additional weakness towards the $282.50 area.
The 50/200-day moving averages remain in solid uptrends and are signaling longer-term higher highs.
RSI has been in a nice uptrend with January and July resistance at 70.
A move above this level would signal additional strength towards 75-80. Support is at 65-60 with a move below 55 signaling a short-term top.
The Spiders S&P Homebuilders ETF (XHB) traded higher for the 3rd-straight session following the surge to $40.13. Near-term resistance is at $40-$40.25 and the 50-day moving average.
Continued closes above the latter would be a bullish development. Rising support is at $39.75-$39.50.
RSI has cleared lower resistance at 60.
Continued closes above this level would be a bullish signal for a run towards 65-70 with the latter representing the early June high. Support is at 45-40.
All the best,