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Friday, April 12, 2019 

Market Action

U.S. markets posted a strong Friday while recovering from losses throughout the week to finish mostly higher, overall. The strong session came after a solid start to the 1Q earnings with the Financial sector leading they way following better-than-expected numbers.

The gains helped pushed the major indexes towards their all-times highs from last October with the small-caps still having some work to do. Volatility sank to a fresh 2019 low and continues to confirm market momentum.

The Dow jumped 1% after testing a high of 26,436 shortly after the opening bell. Fresh and lower resistance at 26,500-26,750 held with a close above the latter getting 27,000 and all-time highs in play.

The S&P 500 soared 0.7% following the morning push to 2,910 and close above the 2,900 level for the first time since early October. Lower resistance at 2,900-2,925 was cleared and held with a move above the latter getting 2,950-2,975 and fresh lifetime highs in focus.

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The Nasdaq gained 0.5% after tapping a high of 7,992 within 10 minutes of trading. Prior and lower resistance from late September at 7,950-8,000 was cleared and held with a move above the latter leasing towards 8,100-8,150 and all-time highs.

The Russell 2000 added 0.4% while testing a session high of 1,589. Late February and major resistance at 1,600 held with continued closes above this level getting 1,625-1,650 back on the map.

For the week, the Nasdaq was up 0.6% and the S&P 500 was higher by 0.5%. The Russell 2000 rose 2 points while the Dow gave back 12 points.

Financials led sector strength after zooming 1.8%. Industrials and Materials were higher by 1.3%. Healthcare fell 0.9% and was the only sector laggard.

For the week, Communication Services rose 1.5% while Consumer Staples and Technology gained 1.1% and 1%, respectively. Healthcare sank 2.4% while Energy dipped 0.1% to round out the losers.


No update this week but should be something mid-week...

Global Economy 

European markets closed higher across the board after UK finance minister Philip Hammond he hoped parliament would end the Brexit impasse by passing a deal by the end of June.

The Belgium20 jumped 1% and Germany's DAX 30 rose 0.5%. France's CAC 40 and UK's FTSE 100 added 0.3% while the Stoxx 600 Europe edged up 0.2%.

Asian markets closed mostly higher following stronger-than-expected trade news out of China.

Australia's S&P/ASX 200 rallied 0.9% and Japan's Nikkei advanced 0.8%. South Korea's Kospi was up 0.4% and Hong Kong's Hang Seng nudged up 0.2%. Meanwhile, China's Shanghai slipped just over a point, or 0.04%.

China's exports for March rose 14.2% from year ago levels, topping expectations for a 7.3% rise. Imports, however, were down 7.6% in March, missing expectations for a 1.3% decline. Overall, China had a March trade surplus of $32.64 billion, topping forecasts between $6-$7 billion. China's March trade surplus with the U.S. came in at $20.5 billion, and for the 1st quarter, China notched a $62.66 billion surplus with the United States.

U.S. Economy

Import and Price Index for March topped expectations with a 0.6% gain for import prices and a 0.7% rise for export prices. Estimates were for gains of 0.3% and 0.2%, respectively. The import price reading reflected a 4.7% petroleum import price rise with a 0.2% ex-petroleum price rise also contributing to the gain. The 0.7% export price reading reflected a 0.7% increase in non-agricultural prices and a 0.9% pop in agricultural prices. Core import prices fell 0.2% in March while core export prices were flat.

Consumer Sentiment fell 1.5 points to 96.9 in April, missing expectation for a print of 98, and follows the 4.6 point jump to 98.4 in March. The expectations component declined to 85.8 from 88.8 and the current conditions index perked up to 114.2 from 113.3 last month. The 12-month inflation gauge slowed to 2.4% from 2.5% while the 5-year index slipped to 2.3% from 2.5%.

Baker-Hughes reported the U.S. rig count was down 3 rigs from last week to 1,022, with oil rigs up 2 to 833, gas rigs down 5 to 189, and miscellaneous rigs unchanged at 0. The U.S. Rig Count was up 14 rigs from last year's count of 1,008, with oil rigs up 18 to 833, gas rigs down 3 to 189, and miscellaneous rigs dipping 1. The U.S. Offshore Rig Count was up 1 rig to 23 and plus 7 rigs year-over-year.

Market Sentiment

Fed policy outlook: The FOMC remains in patient mode, awaiting more data for directional clues. This was supported by the FOMC minutes as well as Fedspeak from last week. Meanwhile, there was grapevine chatter that Herman Cain, a potential candidate for one of the two vacant Fed governor positions, will take himself out of the running, after lacking support from several GOP senators.

The iShares 20+ Year Treasury Bond ETF (TLT) fell for the 2nd-straight session following the backtest to $122.63 with prior and upper support at $122.50-$122 holding. A close below the latter and the 50-day moving average would signal additional weakness with risk towards $121-$120.

Lowered resistance is at $123-$123.50. The former represents prior resistance from late March and early January with continued closes back above $124 being a more bullish development.

RSI is in a downtrend with support at 45-40 and the latter representing the start of March low. Resistance is at 50 with a move back above this level signaling relief from the recent selling pressure.

Volatility Index

The S&P 500 Volatility Index ($VIX) stayed deflated throughout the session after kissing 11.95 ahead of the closing bell. The close below 12.50 was a very bullish signal for continued market strength with new support from last September at 11.50-11.

Lowered resistance is at 12.50-13. There is wiggle room up to 13.50, especially with earnings season heating up and Friday's high at 12.96, with a move above this level likely leading towards 14-14.50 and a retest of the 50-day moving average.

RSI is in a downtrend with support in the 35-30 area and the February lows. There is a chance for a dip into the 20's but the 30 level has been holding since March 2016. In fact, the last time the VIX drifted below 30 was in early 2005.

Market Analysis

The Invesco QQQ Trust (QQQ) reached an intraday peak of $185.95 and fresh 2019 high with September and lower resistance at $186-$186.50 getting challenged but holding. Continued closes above the latter gets $187-$187.50 and fresh all-time highs in play with momentum towards $189-$190.

Current support is at $185-$184.50. A close back below the latter would be a slightly bearish signal with additional weakness towards $183-$182.50.

RSI has been flatlining with resistance at 75-80 and the latter representing the mid-March peak along with the January 2018 high. Continued closes above 80 could lead to a push towards 85-90 but still signaling overbought levels. Support is at 70-65 with a move below the latter signaling additional weakness.


The Spiders S&P Homebuilders ETF (XHB) extended its winning streak to 3-straight sessions after testing a fresh 2019 peak of $40.78. Prior and lower resistance from last August at $40.50-$41 was cleared and held. A close above the latter would be be a continuing bullish signal with upside potential towards $41.50-$42 and February 2018 levels.

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Rising support is at $40.50-$40. A move below $39.50 would be a slightly bearish signal with additional weakness towards $38.50 and the 50-day moving average.

RSI is in an uptrend with near-term resistance at 75 and the peak from last week. A move above this level would be a bullish signal for additional strength towards 78-80 and February highs. Support is at 65, if 70 fails, with a move below this level signaling additional weakness and a possible near-term top.

All the best,

Roger Scott