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Monday, March 11, 2019 

Market Action

U.S. markets snapped a 5-session slide despite early weakness in the blue-chips following an upbeat interview with Fed Chair Jerome Powell that aired Sunday evening. Powell said despite global headwinds, the Fed is not in any hurry to alter rates for now and remains patient.

The rebound cleared prior and near-term resistance levels with volatility falling back below a key level of support. March expiration week is typically bullish but there are a number of headwinds that remain in play before Friday's closing bell to see if a near-term bottom has been formed.

The Nasdaq showed the most strength after surging 2% while tapping an intraday high of 7,558. Prior resistance at 7,500-7,550 and the 200-day moving average was cleared and held to set up a possible run towards 7,600-7,650.

The Russell 2000 rallied 1.9% after testing an intraday high of 1,548 and session peak. Prior and lower resistance at 1,540-1,550 was cleared and held with continued closes above the latter signaling a possible near-term bottom.

The S&P 500 soared 1.5% following the late day run to 2,784. Fresh and lower resistance at 2,775-2,800 was tripped and held on the close back above the 200-day moving average with a move above the latter being a continuing bullish signal.

The Dow climbed 0.8% despite the opening weakness to reach a late day peak of 25,661. Current and lower resistance at 25,600-25,800 was cleared and held on the 453-point rebound with continued closes above 26,000 being a more bullish signal.

Technology led sector strength after zooming 2.2%. Communication Services and Energy rose 1.7% and 1.6%.

There were no sector laggards.

Global Economy 

European markets were higher across the board despite weaker-than-expected economic news out of German and ahead of Tuesday's U.K. parliamentary vote over Prime Minister Theresa May's Brexit deal.

The Belgium20 was higher by 0.9% while the Stoxx 600 Europe and Germany's DAX 30 were up 0.8%. France's CAC 40 advanced 0.7% and UK's FTSE 100 rose 0.4%.

German industrial declined 0.8% in January, missing forecasts for a rise of 0.4%.

Asian markets were mostly higher following news out of China that there has been consensus reached on many issues in trade talks with the United States.

China's Shanghai surged 1.9% and Hong Kong's Hang Seng rallied 1%. Japan's Nikkei added 0.5% and South Korea's Kospi was up less than a point, or 0.03%. Australia's S&P/ASX 200 was down 0.4%.

Chinese loan and money supply reported 885.8 billion yuan ($132 billion) in new loans in February, below forecasts and much lower than the 3.23 trillion yuan in new lending in January.

U.S. Economy

January Retail Sales rebounded 0.2%, and rose 0.9% excluding autos, following a disastrous December where sales dove 1.6% overall and plunged 2.1% excluding auto. Sales excluding autos, gas, and building materials climbed 1% after dropping 1.8% the prior month. Compared to last January, sales are up 2.6% year-over-year and are up 3.2% for the core. Motor vehicles and parts declined 2.4% after the prior 0.3% gain. Gas station sales dropped another 2% versus -5.7% while food sales bounced 1.1% from -0.3%. Building materials surged 3.3% from 0.5% and furniture sales slid 1.2% from -1.3%. Department store sales edged up 0.1% from -3% while sporting goods rallied 4.8% from -6.1%. Miscellaneous sales rebounded 0.1% from -5.3% and non-store retailers were up 2.6% from -5%.

Business Inventories rose 0.6% in December, matching expectations, while sales fell 1%. This follows November reading of unchanged on inventories and -0.6% for sales. Retailer inventories were 0.9% higher after dipping 0.4% the previous month, with auto/parts stocks up 0.6% from, the same as November. The climb in inventories brought the inventory-sales ratio climbed to 1.38 from 1.36 and is the highest since mid-2017.

Market Sentiment

The iShares 20+ Year Treasury Bond ETF (TLT) fell for the first time in 6 sessions following the backtest to $120.98. Fresh and upper support at $121-$120.50 was breached but held with a close below the latter and the 50-day moving average signaling additional weakness.

Current resistance remains at $121.50-$122.

Volatility Index

The S&P 500 Volatility Index ($VIX) tested a morning peak of 16.43 with near-term and upper resistance at 16-16.50 and the 200-day moving average holding.

The fade to 14.35 afterwards and close below the 15 level was a bullish signal. Current support is at 14.50-14 with continued closes back below 13.50 likely leading to higher highs for the overall market.

Market Analysis

The Russell 2000 ETF (IWM) snapped a 5-session slide after trading to a high of $154.31. Prior add lower resistance is at $154-$154.50 was cleared and held. Continued closes back above the $155 level would be a more bullish signal for another run towards $157-$157.50 and the 200-day moving average.

Near-term support is at $152-$151.50. A close below the latter opens up risk towards $150-$148 and an uptrending 50-day moving average.

RSI is back in an uptrend with resistance at 55-60. A move above the latter would be a bullish signal for a possible run towards 65-70. Support is at 50 with backup at 45-40 on a move back below this level.

Sector

The Spider Gold Shares (GLD) fell for the 3rd-time in 4 sessions $121.92. Near-term and upper support at $122-$121.50 was breached but held into the closing bell. A move back below $121 would be a slightly bearish development for lower lows towards the $120 area.

Current resistance is at $122.50-$123 and the 50-day moving average. Continued closes back above the latter would signal renewed strength and a possible run towards $124.50-$125.

RSI is back in a slight downtrend with strong support at 40 and a level that has been holding since late September. A close below this level would signal additional weakness towards 35-30 and August 2018 levels. Resistance is at 45-50.

All the best,

Roger Scott
WealthPress