U.S. markets showed strength throughout Monday’s action following confirmation President Trump will extend the March 1st tariff deadline.
The President also cited substantial progress on key issues was made following U.S./ China trade talks that also helped market enthusiasm.
The gains propelled the major indexes towards prior resistance levels from mid-October with support levels from early November in play on a pullback.
The breakout to higher levels looks bullish on the charts, however, volatility stayed elevated throughout the session while holding the 15 level.
The Nasdaq advanced 0.4% following the opening push to 7,602.
Lower and upper resistance from early November at 7,550-7,600 was tested on the close above the former with the 200-day moving average also holding for the 2nd-straight session.
The Dow added 0.2% after testing a high of 26,241. Fresh and lower resistance at 26,250-26,500 held on the 2nd-straight close above the 26,000 level.
The S&P 500 was up 0.1% following the morning run to 2,814 shortly after the opening bell.
Lower resistance from early November at 2,800-2,825 was cleared but failed to hold.
The Russell 2000 slipped 0.1% after trading to a first half high of 1,602.
Fresh and lower resistance at 1,600-1,615 was cleared but held on the 2nd-straight close above the 200-day moving average.
Materials led sector strength after rising 0.7%. Technology gained 0.5% while Financials and Industrials rose 0.4%.
Utilities were the worst performing sector after falling 0.8%. Real Estate and Consumer Staples were down 0.7% and 0.6%, respectively.
Global Economy – European markets showed strength despite reports U.K. PM May would delay the Brexit vote until March 12th.
Germany’s DAX 30 was higher by 0.7% and France’s CAC 40 was up 0.5%. The Belgium20 tacked on 0.4% and the Stoxx 600 Europe advanced 0.3. UK’s FTSE 100 added 0.1%.
Asian markets closed higher across the board amid surging U.S./ China trade optimism.
China’s Shanghai zoomed 5.6% and is into bull market territory after rallying 20% percent from its intraday lows seen in early January.
Elsewhere, Hong Kong’s Hang Seng and Japan’s Nikkei rose 0.5%.
Australia’s S&P/ASX 200 added 0.3% and South Korea’s Kospi nudged up 0.1%.
Chicago Fed National Activity Index fell 0.48 points to -0.43 in January, missing estimates for a positive print of 0.13, and suggesting below-trend growth.
The 3-month moving average slipped to unchanged from 0.16. For the month, 46 of the 85 indicators deteriorated, with 35 making positive contributions.
Wholesale Inventories jumped 1.1% in December, versus estimates for a gain of 0.3%, with sales falling 1%. Inventory strength was in the durable goods component, up 1.5%, which overshadowed soft nondurable goods, including weakness in drugs, down -1.2%.
Sales have fallen for three straight months, largely due to oil price weakness (-11.1%), though autos also declined -2.2%. The inventory-sales ratio climbed to 1.33 from 1.30, and is the highest since November 2016.
Dallas Fed manufacturing index came in at 12.1 for February, topping forecasts of 4.8. The components were quite mixed, however, reflecting continued but slower expansion in general.
The employment index nearly doubled to 12.6 from 6.6, though the workweek was halved to 1.8 from 3.6. New orders declined to 6.9 from 11.6.
The prices paid index inched up to 21.8 from 21.2, with prices received at 5.2 from 6.4. The 6-month general business activity index improved to 17.7 from 11.7, with employment at 33.2 from 39.4, new orders at 44.9 from 44.7, while prices paid were 23.7 from 31.8 and prices received at 25.9 from 26.7
Atlanta Fed’s GDPNow forecast of Q4 growth was bumped to 1.86% from last Thursday’s forecasts of 1.42%. The contribution of inventory investment was increased to -0.15% from -0.58%.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) tested a low of $120.92 to fall back towards the lower end of its month long trading range between $119.50-$122.50.
Current and upper support at $121-$120.50 and the 50-day moving average held. A close below $119.50 would be bearish signal for lower lows.
Near-term and lowered resistance is at $121.50-$122. A move above $122.50 would be a more bullish development signaling additional strength.
Market Analysis – The Spider Small-Cap 600 ETF (SLY) was lower for the 2nd time in the past 3 sessions following a 7-session winning streak.
The late day fade to $69.95 breached fresh and upper support at $70-$69.50 on the close just below the former and the 200-day moving average.
October resistance at $70.50-$71 held on the morning rally to $70.65. A close above $72 would be a continuing bullish development for higher highs.
RSI is signaling slightly overbought levels with near-term resistance at 75. Continued closes above this level gets 80-85 and August 2017 peaks in play.
Support is at 70 with a close below this level signaling additional weakness towards 65-60.
The Energy Select Sector Spider (XLE) was up for the 2nd-straight session with the intraday high reaching $66.09. Prior and lower resistance from mid-month at $66-$66.50 was challenged but held.
Continued closes above the $67 level and late November resistance would be a slightly bullish signal for a possible run towards $69.50-$70 and the 200-day moving average.
Current support is at $65.50-$65 with a close below $64 signaling a near-term top.
RSI is back in a slight uptrend with mid-month hurdles at 65-68 and longer-term resistance at 70 from September/ October.
Continued closes above the latter would signal additional momentum towards 75-80 and May 2018 highs. Support is at 60 with risk to 55-50 on a move below this level.
All the best,
Roger Scott.