U.S. markets were weak for a 2nd-straight session as Wall Street awaits testimony from Fed Chairman’s Jerome Powell’s congressional testimony midweek.

The start of 2Q earnings season also had investors slightly nervous as estimates have been coming down in recent weeks with a major conglomerate company reporting numbers Tuesday morning.

The Dow fell 0.4% following the intraday pullback to 26,744.

Near-term and upper support at 26,750-26,500 held with a close below the latter likely getting 26,250-26,000 and the 50-day moving average in play.

The S&P 500 was down 0.5% after testing a low of 2,770 during the 2nd half of action.

Near-term and upper support at 2,975-2,950 was breached but held by a point with a close below the latter being a bearish development with risk toward 2,925-2,900 and the 50-day moving average.

The Nasdaq declined 0.8% after tapping an intraday low of 8,078.

Current and upper support at 8,100-8,050 was breached and failed to hold by a couple of points with a close below the 8,000 level signaling additional weakness.

The Russell 2000 dropped 0.9% following the intraday backtest to 1,559.

Upper support at 1,560-1,545 held by just over a point with a close below the later and the 50-day moving average being a bearish development.

Real Estate led sector strength after gaining 0.4% while Utilities added 0.2%.

Materials and Communication Services led sector weakness after falling 1.2% and 0.9%, respectively.

Global Economy – European markets closed slightly lower following political developments in Turkey and Greece.

Turkish President Erdogan moved to replace the Turkish central bank head while a new Greek government has the conservatives taking the reigns.

The Belgium20 fell 1% while Germany’s DAX 30 was down 0.2%. The Stoxx 600, France’s CAC 40 and UK’s FTSE 100 were all lower by 0.1%.

Asian markets settled with wider losses over escalating trade tensions between Japan and South Korea, as well a flood of new listings in China weighing on sentiment.

China’s Shanghai sank 2.6% and South Korea’s Kospi tumbled 2.2%.

Hong Kong’s Hang Seng tanked 1.5% and Australia’s S&P/ASX 200 stumbled 1.2%. Japan’s Nikkei dropped 1%.

Tokyo and Seoul are locked in a dispute over forced wartime labor, with Japan imposing tighter restrictions on the export of high-tech materials used in smartphone displays and chips to South Korea.

TD Ameritrade IMX Level for June checked in at 4.61.

Consumer Credit rose $17.1 billion in May following April’s $17.5 billion increase.

Nonrevolving credit was up $9.9 billion versus the $10.5 billion gain last month. Revolving credit rose $7.2 billion versus $7 billion previously.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 3rd time in 4 sessions following the opening push to $133.22. Prior and lower resistance at $133-$133.50 was breached but held.

Continued closes above the latter would be a bullish signal for a retest towards $134-$134.50 with last week’s 52-week peak at $134.29.

Support is trying to move up to $132.50-$132.

A close below the $131.50 level would be a bearish signal for additional weakness towards $130.50-$130 and levels from early June.

Market Analysis – The Russell 2000 ETF (IWM) fell for the 1st time in 3 sessions following the 2nd half pullback to $154.89. Prior and upper support at $155-$154.50 held.

A move below the latter would be a slightly bearish development with risk towards $153.50-$153 and the 50-day moving average.

Current and lowered resistance is at $156-$156.50.

Continued closes above the $158 level would be a more bullish signal momentum has returned.

RSI is back in a downtrend with support at 55-50.

A close below the 45 level and the late June low would be a bearish signal for additional weakness.

Resistance at 60 has been holding since early March on the plunge below this level.

The Materials Select Sector (XLB) was lower for the 2nd-straight session following the backtest to $58.14.

Current and upper support at $58-$57.50 held with a close below the latter being a slightly bearish signal for additional weakness.

Near-term resistance at $58.50-$59. A move above the latter would be a renewed bullish signal for a retest towards $59.50-$60.

RSI is in a downtrend with support is at 55-50.

A close below the latter would be a bearish signal for additional weakness. Resistance is at 60.

We are allocating the portfolio as follows:

30% in AMD closed on Monday at 32.01
30% in CDNS closed on Monday at 74.37
30% in JD closed on Monday at 30.54
10% in TMF closed on Monday at 24.94

Option Traders – the following (regular monthly) options meet our criteria:

AMD 18OCT $32 Strike Price CALL (Expires October 18, 2019)
CDNS 20DEC $75 Strike Price CALL (Expires December 20, 2019)
JD 20SEP $32 Strike Price CALL (Expires September 20, 2019)
TMF15NOV $25 Strike Price CALL (Expires November 15, 2019)

All the best,
Roger Scott.