Market Recap 01-19-2018

0Market Action

U.S. markets took a breather on Thursday as the major indexes closed in negative territory on less volatility and ahead of January option expiration tomorrow.

The event could cause a return of volatility to slightly elevated levels along with the results of a couple of major blue-chip companies earnings that were reported after today’s close.

The Dow slipped 0.4% but managed to trade to a fresh all-time high of 26,153 before pulling back while holding the 26,000 level for the second-straight session.

The S&P 500 dipped 0.2% after making a run to 2,805 but failed a fresh record high by two points.

The Nasdaq dropped 0.02% after failing its all-time high by 17 points while closing back below the 7,300 level.

The Russell 2000 kissed 1,586 on the open but failed to take out Wednesday’s peak and resistance at 1,600 after sliding 0.6%.

Technology and Health Care were the only sectors that showed gains after rising 0.2% and 0.02%. Real Estate and Energy paced the losers after falling 1% and 0.8%, respectively.

Global Economy

European markets closed mixed with UK’s FTSE 100 closing lower for the 4th-straight session after falling 0.3% while the Belgium20 gave back 0.2%.

Germany’s DAX 30 jumped 0.7% while the Stoxx Europe 600 climbed 0.2%. France’s CAC 40 was up less than a point, or 0.02%.

The UK Housing Price Index came in at a plus 8 and ahead of expectations for a print of minus 2.

Asian markets were mostly higher after China’s economic growth accelerated for the first time in 7 years. China’s Shanghai rose 0.9% while South Korea’s Kospi and Hong Kong’s Hang Seng added 0.4%. Japan’s Nikkei Stock declined 0.4% and Australia’s S&P/ASX 200 slipped 0.02%.

China Q4 GDP rose 6.8% year-over-ÿear, stronger than expectations of 6.7%.

China December industrial production rose 6.2% year-over-year and ahead of forecasts of 6.1%.

China December new home prices rose in 57 of 70 cities, up from 50 in November and the most in 6 months.

U.S. Economy

December Housing Starts Permits dropped to 1,192,000 and below expectations of 1,300,000.

U.S. initial jobless claims checked in at 220,000 versus expectations for a print of 250,000.

January Philadelphia Fed Business Outlook Survey General Conditions Index came in at 22.2 versus consensus of 25.

Market Sentiment

Fed funds futures implied rates have moved higher and are now suggesting about 85% chance for a 25 basis-point March hike, with a 64% probability for another tightening in June.

A third rate increase this year, according to the dot plot, has risen to just over 50%.

Atlanta Fed’s Q4 GDPNow estimate was raised to 3.4%, up from 3.3%. The fourth-quarter forecast of real consumer spending growth increased from 3.8% to 4%.

The iShares 20+ Year Treasury Bond ETF (TLT) traded to a low of $123.54 with backup support at $123.75-$123.50 and the 200-day moving average now in play. A close below the latter would be a continued bearish development with risk to $122.50-$122. Lowered resistance is at $124-$124.25

Inverse Volatility

The VelocityShares Daily Inverse VIX (ZIV) tested an intraday low of 90.41 with upper support at 90-88.50 holding and levels that have been holding all month. A move below the latter would be a bearish development. Lowered resistance at 92.75-93.25.

Market Analysis

The Spiders Dow Jones Industrial Average ETF (DIA) traded to an all-time high of $261.31 with fresh resistance at $261.25-$261.50 holding. A move above the latter could lead to a continued run towards $262.50-$263.50. Rising support is at $258-$257.50 with a close below the latter signaling a possible short-term top.

We mentioned RSI was on track to test the 90 level and October resistance and a level that held Before weakening today. Support is at 80 with risk to 70 on a move below this level.

Sector

The Materials Select Sector (XLB) traded to a fresh 52-week and all-time of $63.66 to start the week with today’s high tapping $63.13. New resistance at $63.25-$63.50 held before the slight pullback into the close.

Continued closes above the latter would be bullish for a push towards $64.50-$65. Support is at $62.50-$62.25 with a close below $62 signaling a possible short-term peak.

RSI recently fell below the 70 level and is current resistance. Support is at the 65-60 level.

Earnings Update

We are off to a good start in the Q4 earnings season.

Including all of this morning’s results, we now have Q4 results from 44 S&P 500 members that combined account for 13.7% of the index’s total market capitalization.

Total earnings for these companies are up +11.4% from the same period last year on +7.5% higher revenues, with 77.3% beating EPS and revenue estimates.

Expect to see a bit of more surprise from the retail sector and tech in the coming days.