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Wednesday, March 13, 2019 

Market Action

U.S. markets showed strength for the 3rd-straight session as better-than-expected economic news outweighed recent trade headlines. Tech led the rally to higher highs with the Dow lagging but finishing in the green for the 2nd time in 3 sessions.

The major indexes remain on track to recover the lower end of the previous near-term trading ranges from the back half of February. A heavy dose of corporate earnings on Thursday along with jobless claims and Friday's expiration of regular March options could help of hinder current momentum.

The Nasdaq gained 0.7% following the intraday run to 7,677. Prior and major resistance at 7,650 was cleared and held on the fresh monthly high with continued closes above this level keeping 7,700-7,750 in play.

The S&P 500 also rose 0.7% after trading to a midday high of 2,821. Fresh and lower resistance at 2,825-2,850 held on the close back above the 2,800 level for the first time since the beginning of the month.

The Dow was higher by 0.6% following the intraday push to 25,776. Prior resistance at 25,750-26,000 was cleared but held with continued closes above the latter being a bullish signal for higher highs.

The Russell 2000 advanced 0.4% after trading an midday peak of 1,562. Upper resistance at 1,550-1,560 held on the close above with additional hurdles at 1,575-1,585 and the 200-day moving average.

Healthcare was the strongest sectors after jumping 1.1%. Industrials rallied 0.9% while Consumer Staples and Financials were up 0.7%.

There were no sector laggards.

Global Economy 

European markets settled mostly higher despite another failed Brexit vote. Prime Minister Theresa May has already promised two more votes this week for lawmakers to decide if the U.K. should leave the EU with no deal, or request a delay to its departure which is currently scheduled for March 29th.

France's CAC 40 rose 0.7% and the Stoxx 600 Europe added 0.6%. The Belgium20 gained 0.5% and Germany's DAX 30 climbed 0.4%. UK's FTSE 100 edged up 0.1%.

The U.K. lowered its gross domestic product estimates from 1.6% to 1.2%. Growth forecasts in 2020 and 2021 stood at 1.4% and 1.6%, compared with forecasts of 1.4% for both years made in October.

Asian markets were weaker across the board as investors wait for more details on any potential trade deal between the U.S. and China.

China's Shanghai fell 1.1% and Japan's Nikkei was down 1%. Hong Kong's Hang Seng gave back 0.5% and South Korea's Kospi was lower by 0.4%. Australia's S&P/ASX 200 slipped 0.2%.

U.S. Economy

MBA Mortgage Applications rose 2.3%, in addition to a 4.3% gain in the purchase index and a 0.2% dip in the refinancing index. The average 30-year mortgage rate sank 3 basis points to 4.64%.

Durable Goods Orders rose 0.4% in January, topping expectations for a decline of -0.8%. Transportation orders increased 1.2% versus 3.1% previously. Excluding transportation, orders dipped 0.1% from 0.3%. Nondefense capital goods orders excluding aircraft bounced 0.8% from -0.9%. Shipments declined 0.5% from a 0.7% gain. Nondefense capital goods shipments excluding aircraft rose 0.8% from 0.1%. Inventories increased 0.4% from 0.3%. The inventory-shipment ratio rose to 1.2 from 1.60.

PPI edged up 0.1% in February, just below estimates of 0.2%, with the core up 0.1%. On a 12-month basis, PPI slowed to a 1.9% year-over-year pace from 2%, with the core slipping to 2.5% from 2.6%. Goods prices bounced 0.4% following the prior 0.8% decline, with energy up 1.8% versus -3.8% previously. Food prices slid 0.3% from -1.7% and service sector prices were unchanged following a 0.3% January rise.

E-Commerce Retail Sales were up 2% for the quarter.

Construction Spending rebounded 1.3% in January, topping forecasts for a rise of 0.3%. Strength was in non-residential spending which rose 2.4% from unchanged in December. Residential spending dipped 0.3% from the prior -1.9% drop. Public spending surged 4.9%, after falling 1% in December. Private construction spending was up 0.2% from -0.7%.

Atlanta Fed's Q1 GDPNow estimate was lifted to 0.4% from 0.2% previously, compared to the 1.5% Blue Chip consensus.

Market Sentiment

The iShares 20+ Year Treasury Bond ETF (TLT) was lower for just the 2nd time in the past 8 sessions following the pullback to $121.62. Fresh and upper support at $121.50-$121 held with a move below $120.75 and the 50-day moving average signaling a near-term top.

Lowered resistance is at $122-$122.50.

Volatility Index

The S&P 500 Volatility Index ($VIX) traded down to 13.25 during the first half of action with upper support at 13.50-13 getting breached and holding. A close below the latter gets 12.50-11.50 in play.

Lowered resistance is at 14-14.50 with continued closes back above 15 being a cautious signal for the overall market.

Market Analysis

The Spider Small-Cap 600 ETF (SLY) was up for the 2nd time in the past 3 sessions after testing an intraday high of $68. Near-term and lower resistance at $68-$68.50 was tapped but held into the closing bell. A move above the latter would be a bullish development for a possible push towards $70 and the 200-day moving average.

Current support is at $67.50-$67 with backup help at $66.50-$66 and the 50-day moving average.

RSI is in a slight uptrend after clearing near-term resistance at 50. Continued closes above this level would signal additional strength towards 55-60. Support is at 45-40.

Sector

The Dow Jones Transportation Average ($TRAN) closed higher after testing an intraday peak of 10,439. Lower and early February resistance at 10,400-10,500 was cleared but held. Continued closes above the latter and the 200-day moving average would be a bullish signal for a possible push towards 10,650-10,750.

The index is trying to form a near-term bottom following a previous losing streak that reached 11-straight sessions. Current support is at 10,300-10,200 with a move back below 10,000 and the r0-day moving average signaling another near-term top.

RSI is back in an uptrend with resistance at 60. A move above this level gets 65-70 in play. Support is at 50 with a move back below this level signaling additional weakness.

All the best,

Roger Scott
WealthPress