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.

Existing Position Update

Looking for NTES to regain uptrend.

Expect to be filled on NVDA

I believe semiconductors have priced in most of the trade war for the next few quarters and are sitting on the sidelines waiting for upside.

Expect some congestion and possibly more upside over the next few sessions…especially if earnings are positive.

Roger Scott