U.S. markets showed weakness for the 2nd-straight finish while closing lower as the start of 4Q earnings season heats up this week.
Tech and the small-caps were hit the hardest as the overall market had it first back-to-back loss of the year.
Concerns over an economic slowdown in China also dampened sentiment along with a flood of Fed speak due the rest of the week.
Volatility rose but held a key level of resistance.
The Russell 2000 tanked 1% after testing an intraday low of 1,431.
Upper support at 1,435-1,425 was breached and failed to hold with a move below 1,420 being a slightly bearish signal.
The Nasdaq dropped 0.9% following the backtest to 6,887.
Fresh and upper support at 6,950-6,900 was breached with the latter holding into the closing bell.
The S&P 500 was lower by 0.5% after testing a low of 2,570.
Near-term and upper support at 2,575-2,550 held with a close below the latter being a slightly bearish signal.
The Dow dipped 0.3% following the pullback to 23,765 and 2nd-straight close below the 24,000 level.
Fresh and upper support at 23,800-23,600 held with a move below 23,500 being a bearish development.
Financials gained 0.6% and were the only sector that showed strength.
Utilities were hammered for 2.3% and easily led sector laggards. Healthcare and Technology were down 1.1% and 0.9%, respectively.
Global Economy – European markets settled in the red and ahead of Tuesday’s vote on Prime Minister Theresa May’s proposed Brexit deal.
UK’s FTSE 100 tumbled 0.9% while the Belgium20 and the Stoxx 600 Europe were down 0.5%. France’s CAC 40 dropped 0.4% and Germany’s DAX 30 gave back 0.3%.
Asian markets closed lower after China announced that its 2018 trade surplus with the U.S. was its largest in more than a decade.
Hong Kong’s Hang Seng sank 1.4% and China’s Shanghai fell 0.7%.
South Korea’s Kospi declined 0.5% and Australia’s S&P/ASX 200 slipped a point, or 0.02%. Japan’s Nikkei was closed for a holiday.
China’s surplus with the U.S. grew 17% from a year ago to $323.32 billion in 2018. Exports to the U.S. rose 11.3% year-over-year in 2018, while imports from the U.S. to China rose a slim 0.7%.
Overall, China’s trade surplus for 2018 was $351.76 billion. Exports rose 9.9% from 2017 while imports grew 15.8%.
There were no major economic reports released.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) fell for the 6th time in 7 sessions following the backtest to $120.24.
Fresh and upper support at $120.50-$120 failed to hold with a move below the latter signaling additional weakness.
Lowered resistance is at $121-$121.50 with continued closes back above $122 signaling a possible near-term bottom.
Market Analysis – The Spider S&P 500 ETF (SPY) had its 6-session winning streak snapped following the pullback to $256.41. Support at $256.50-$256 held with a move below back below $255 signaling caution.
Near-term resistance is at $258-$258.50 with continued closes above $260 being a more bullish development.
RSI is back in a slight downtrend with support at 50.
A move below this level would signal additional weakness towards 45-40.
Current resistance is at 55-60 with a move above the latter and the November peak signaling additional strength.
The Financial Select Sector Spiders (XLF) has been in a mini trading range between $24-$24.50 over the past 6 sessions. Monday’s peak reached $24.75 on the close above the latter with fresh resistance is at $24.75-$25 holding.
Continued closes above $25.25 and the 50-day moving average would be a more bullish signal for higher highs.
Current support is at $24.25-$24 with a move below the latter being a slightly bearish signal.
RSI has been in a slight uptrend with resistance at 55-60 and the latter representing the November high. Support is at 45-40.
All the best,
Roger Scott.