U.S. markets were choppy throughout Monday’s action following drone strikes on an oil facility in Saudi Arabia over the weekend. The attacks, which the U.S. has blamed on Iran, hit key Saudi facilities, disrupting 5% of the global daily oil production.
Despite the heightened geopolitical risks and the spike in oil, the major indexes held near-term support levels with the small-caps showing strength throughout the session.
Volatility was elevated but held prior resistance levels and is back at a neutral reading.
The Russell 2000 rose 0.4% despite the morning backtest 1,570. Fresh but shaky support at 1,575-1,565 was split with risk to 1,550-1,540 on a move below the latter.
The intraday rebound to 1,590 and close a half-point below lower resistance at 1,585-1,600 was a slightly bullish signal for the overall market.
The Dow declined 0.5% after testing a midday low of 27,032 while snapping an 8-session winning streak.
Upper support at 27,000-26,800 held with a move below the latter getting 26,600 and the 50-day moving average back in play.
The S&P 500 was down 0.3% after testing an intraday low of 2,990 while closing below the 3,000 level for the 1st time in 4 sessions.
Prior support at 2,975-2,950 is back in focus with a move below the latter and the 50-day moving average being a bearish development.
The Nasdaq gave back 0.3%, as well, following the opening low at 8,121. Near-term and upper support at 8,150-8,100 was breached but held with a close below 8,050 and the 50-day moving average signaling additional weakness towards 8,000-7,950.
Energy led sector strength after zooming 3x% while Real Estate added x to round out the winners.
Materials were the weakest sector after falling x while Consumer Staples and Consumer Discretionary dropped x and x, respectively.
Global Economy – European markets closed lowered across the board following the escalation of tensions in the Middle East along with lingering Brexit concerns.
France’s CAC 40 dropped 0.9% and Belgium20 sank 0.8%. Germany’s DAX 30 stumbled 0.7% while the Stoxx 600 and UK’s FTSE 100 declined 0.6%.
U.K. Prime Minister Boris Johnson met with European Commission Jean-Claude Juncker who reminded Johnson that it was now up to the British government to offer a solution to the Brexit impasse.
Asian markets settled mixed with Japan’s Nikkei closed for a holiday.
South Korea’s Kospi added 0.6% while Australia’s S&P/ASX 200 nudged up 0.1%.
Hong Kong’s Hang Seng fell 0.8% and China’s Shanghai slipped a half-point, or 0.02%.
China’s industrial production growth for August rose just 4.4% year-on-year, its slowest pace in over 17 years.
Empire State Manufacturing Survey fell 2.8 points to 2 in September, well below expectations for a print of 7, after inching up a half-point to 4.8 in August.
The employment index jumped to 9.7 from -1.6, with the workweek rebounding to 1.7 from -1.3, although new orders slipped to 3.5 from 6.7.
Prices paid increased to 29.4 from 23.2, and prices received moved up to 9.2 from 4.5. The 6-month index dropped to 13.7, from 25.7, and is the lowest since April, with employment at 12.1 from 21.1, and new orders at 21.9 from 31.7. T
he future prices paid index climbed to 42.5 from 38.1, with prices received at 17 from 12.9.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) snapped a 5-session losing streak after trading to a high of $138.57.
Fresh and lower resistance at $138.50-$139 and the 50-day moving average was challenged but levels that held with continued closes above the $140 level being a more bullish development of a near-term bottom.
Support is at $137-$136.50.
A close below the $136 level would be a renewed bearish signal with risk towards the $134-$133.50 area.
Market Analysis – The Spider S&P 500 ETF (SPY) fell for the 2nd-straight session after trading to an intraday low of $299.45. Current and upper support at $299.50-$299 was tripped but held on the 4th-straight close above the $300 level.
A close below $299 would be a slightly bearish signal with downside risk towards $298-$297.50.
Lowered resistance is at $301-$301.50 with additional hurdles at $302-$302.50.
RSI is in a downtrend with support at 60.
A move below this level would signal additional weakness towards 55-50 with the latter representing prior and late August resistance.
Current resistance is at 65 with a move above this level being a bullish signal for a run towards 70-75 and early July highs.
The Energy Select Sector Spider (XLE) was up for 2nd-straight session after surging to a high of $63.65. Late July and lower resistance at $63.50-$64 was cleared but held.
A close above the $64.50 level and the mid-July high of $64.66 would be an ongoing bullish signal for continued strength towards $65-$65.50 and prior support levels from late April.
Current and rising support is at $62.50-$62 and the 200-day moving average.
A close below the latter would be signal a false breakout with backtest potential towards $61.50-$61.
RSI is in an uptrend with resistance at 70.
A close above this level would be a bullish signal for additional strength towards 75-80 and May 2018 highs. Support is at 65-60.
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CELG: +25% Allocation | $89.62 Protective Stop Loss | $110.20 Profit Objective
EXPE: +25% Allocation | $119.09 Protective Stop Loss | $147.03 Profit Objective
NXPI: +25% Allocation | $99.16 Protective Stop Loss | $120.48 Profit Objective
QCOM: +25% Allocation | $72.56 Protective Stop Loss | $87.40 Profit Objective
Option Traders – the following (regular monthly) options meet our criteria:
CELG – 17JAN $100 Strike Price CALL (Expires January 17, 2020)
EXPE – 15NOV $135 Strike Price CALL (Expires November 15, 2019)
NXPI – 15NOV $115 Strike Price CALL (Expires November 15, 2019)
QCOM – 20DEC $80 Strike Price CALL (Expires December 20, 2019)
All the best,