U.S. markets were choppy throughout Thursday’s session following comments from Commerce Secretary Wilbur Ross on China trade talks.

Ross said that China and the U.S. were not close to striking a trade deal and that the U.S. is miles and miles away, adding the two countries have lots and lots of issues.

The partial government shutdown also shows no signs of ending anytime soon as two competing bills failed to gain approval.

Despite the nervousness, the major indexes closed mostly higher with the blue-chips lagging.

The Russell 2000 rose 0.7% after testing a first half high of 1,465.

Lower resistance at 1,465-1,480 was challenged for the 2nd-straight session and a level that held into the closing bell.

The Nasdaq also gained 0.7% following the intraday run to 7,078.

Lower resistance 7,100-7,150 held for the 3rd-straight session with a move above the latter being a bullish signal.

The S&P 500 edged up 0.1% after trading a session high of 2,647.

Lower resistance at 2,650-2,675 was challenged but held for the 3rd-straight session.

The Dow dipped 0.1% following the intraday backtest to 24,422. Upper support at 24,300-24,100 and the 50-day moving average easily held on the 2nd-straight close above the 24,500 level.

Technology paced sector strength after rallying 0.9%. Utilities and Industrials rose 0.6%.

Consumer Staples and Healthcare led sector laggards with declines of 1.3% and 0.8%, respectively. Materials fell 0.5%.

Global Economy – European markets showed strength despite comments from ECB President Mario Draghi who spoke of downside risks to the economy.

France’s CAC 40 jumped 0.7% and Germany’s DAX 30 advanced 0.5%.

The Stoxx 600 Europe climbed 0.2% while the Belgium20 was up a point, or 0.03%. UK’s FTSE 100 fell 0.4%.

The Eurozone Purchasing Managers Index checked in at to 50.7 in January from 51.1 in December, and represented its lowest level in over five years.

Germany downgraded its expectation for GDP growth in 2019 to 1%, much lower than the 1.8% target from the government’s fall forecast. For 2020, the government expects GDP to expand by 1.6%.

France’s services PMI fell to 47.5.

Germany’s numbers for manufacturing showed a slide into contraction of 49.9, the lowest since June 2013.

Asian markets closed mostly higher with Japan’s Nikkei bucking the trend after slipping 0.1%.

South Korea’s Kospi rallied 0.8% while Australia’s S&P/ASX 200, China’s Shanghai and Hong Kong’s Hang Seng were higher by 0.4%.

Initial Jobless Claims fell 13,000 to 199,000, and is at the lowest in 49 years. The 4-week moving average moved down to 215,000 versus 220,500, previously. Continuing claims declined 24,000 to 1,713,000. Jobless claims from Federal workers rose 15,000.

PMI Composite Flash bounced 1.1 points to 54.9 in January, with employment and output components improving. The January non-manufacturing index slipped 0.2 points to 54.2 after ticking down 0.3 points to 54.4 in December.

The employment sub-index fell to 52.1 from 53.6 in December as employment fell to 52.5 from 53.4.

Input prices were down. The survey noted a solid start to 2019, and the data is consistent with an annualized growth rate of about 2.5%.

The survey does not include the government sector so the shutdown effects may not be fully captured.

Leading Indicators slipped 0.1% to 111.7 in December, matching expectations. Six of the 10 components made positive contributions, led by jobless claims (0.13%) and the leading credit index (0.07%), while 3 were negative, led by stocks (-0.23%). The average workweek was unchanged.

The Kansas City Fed Manufacturing Index dipped 1 point to 5 in January, topping forecasts for a print of 2.

The report noted weakness resulting from tariffs, as well as a lack of workers, while only about 17% of manufactures surveyed indicated the government shutdown impacted negatively.

The employment index fell to 7 from 10 while new orders fell to 1 from 7. Prices received climbed to 23 from 8. The 6-month composite fell to 18 from 22, with employment at 22 from 37, and new orders at 25 versus 23.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) showed signs of breaking out of a 7-day trading range following the run to $121.26.

Fresh and lower resistance at $121.50-$122 was challenged with a close above the latter signaling additional momentum.

Rising support is at $120.50-$120.

Market Analysis – The Invesco QQQ Trust (QQQ) has been in a mini trading range between $160-$165 for 7 sessions. Thursday’s peak reached $163.44 with lower resistance at $163.50-$164 holding.

Near-term support is at $162.50-$162 with a move below $160 signaling a possible retest towards $158-$157.50.

RSI is back in a slight uptrend with resistance at 60.

A close above this level would signal additional strength towards 65-70 and August highs. Support is at 50.

The Consumer Discretionary Select Spiders (XLY) closed higher for the 2nd-straight session after testing an intraday high of $105.97. Lower resistance at $106-$106.50 was challenged but held.

A move above the latter would be a slightly bullish signal that could lead to a run towards $107.50-$108 and the 200-day moving average.

Current support is at $105-$104.50. A move below the latter opens up risk towards $103.50-$103 and the 50-day moving average.

RSI is in a slight uptrend with resistance at 60.

A move above this level would signal additional strength towards 65-70 with the latter representing August and September peaks. Support is at 55-50.

Existing Position Update

Scratched FDX without risking exercise.

I’m seeing opportunity in EBAY and TXT…will evaluate tomorrow.

Right now we need to be patient since markets are increasingly vulnerable.

Maybe good opportunity for AMZN iron condor – depending on volatility.

I will update you tomorrow as usual.

Roger Scott.