U.S. markets were choppy throughout Tuesday’s session after opening in positive territory while struggling to keep momentum.

Nervousness ahead of the Fed’s two-day meeting on interest rates and key corporate earnings kept bullish traders on the sidelines.

The mixed closed has pushed the major indexes back into a mini 9-day trading range that is showing more strength to the upside than the downside, providing near-term support levels hold.

Volatility stayed slightly elevated but held key levels of resistance for the 2nd-straight session.

The Nasdaq dropped 0.8% following the intraday pullback to 7,011.

Upper support at 7000-6,950 held with a move below the latter and the 50-day moving average being a bearish development.

The S&P 500 slide 0.2% after testing a early morning low of 2,631.

Near-term and upper support at 2,625-2,600 held for the 2nd-straight session with near-term resistance at 2,650.

The Russell 2000 slipped 0.1% following the backtest to 1,469.

Upper support at 1,465-1,450 held with a close below 1,440 and the 50-day moving average being a bearish signal.

The Dow was up 0.2% after reaching an intraday peak of 24,674.

Prior and lower resistance at 24,600-24,800 was breached but held with more important hurdles at 25,000 and the 200-day moving average.

Industrials and Materials led sector strength after rallying 1.4% and 1%.

Communication Services and Technology paced sector weakness after falling 1.2% and 1.1%, respectively.

Global Economy – European markets showed strength ahead of the parliamentary debate and vote over Prime Minister Theresa May’s updated Brexit deal.

After the close, May lost by 230 votes after members of the U.K.’s House of Commons voted 432 to 202 to reject the deal.

UK’s FTSE 100 jumped 1.3% while the Stoxx 600 Europe and France’s CAC 40 rose 0.8%.

The Belgium20 added 0.3% and Germany’s DAX 30 edged up 0.1%.

Asian markets settled mixed as President Trump and Chinese Vice Premier Liu He prepare to meet for two days of trade talks starting on Wednesday.
While a meeting with Trump may show that the U.S. is serious about striking a deal, charges against a major Chinese Tech firm could cast a cloud over negotiations going forward.

South Korea’s Kospi advanced 0.3% and Japan’s Nikkei climbed 0.1%. Australia’s S&P/ASX 200 fell 0.5%.

Hong Kong’s Hang Seng was down 0.2% and China’s Shanghai slipped 0.1%.

Redbook Store Sales were up 5.8% for the year in the week ending January 26th.

U.S. chain store sales rebounded 2.5% in the week ending January 26th, after slumping 1.3% in the prior week. The 12-month sales pace accelerated to a 2.1% year-over-year rate, from 0.7%.

The S&P Corelogic Case-Shiller 20-City home price index for November showed a 0.1% slip to 213.66 with the 12-month clip decelerating to 4.68% year-over-year from 5.02%.

The 10-city index also dipped 0.1% to 227.42. The annual pace also slowed to 4.30% year-over-year versus 4.70%. However, all 20-cities surveyed showed annual gains, led by Las Vegas (12.04%) and Phoenix (8.1%).

January Consumer Confidence fell to an 18-month low of 120.2 from 126.6 in December, and missing estimates for a print of 124.3.

The present situations index fell to 169.6 from 169.9 while the expectations component dropped to 87.3 from 97.7.

The jobs strength diffusion index rose to 33.7 from 33.3 in December And the labor differential rose to 33.7 from 33.3.

The 12-month inflation gauge dipped to 4.4% from 4.5%.

Market Sentiment – The FOMC will issue its post-meeting statement on Wednesday at 2:00pm (EST) and will be followed by Chair Powell’s post-meeting press conference shortly afterwards.

The market consensus is for no change in the fed funds target range at 2.25%-2.5%, and ongoing data dependency as rates enter the range of estimates for a “neutral” rate.

The Fed’s discussion of the economic outlook will rely more on their estimates at this meeting given delays from the government shutdown for numerous data releases.

The words “patient” and “flexible” are likely to be embedded in the policy statement and used often by Chairman Powell in his press conference.

The iShares 20+ Year Treasury Bond ETF (TLT) snapped a 2-session slide after trading to a high of $121.04. Resistance at $120.75-$121.25 was split on the close above the former.

Continued closes above $122 and mid-December and early January resistance would signal a more bullish development.

Support remains at $120.50-$120.

Market Analysis – The Spider Small-Cap 600 ETF (SLY) closed lower for the 2nd-straight session despite testing an intraday high of $65.27. Lower resistance at $65.50-$66 held.

Continued closes above the latter would be a bullish development for a possible run towards $68-$70 and the 200-day moving average.

Current support is at $65-$64.50 with Tuesday’s low tapping $64.94.

A close below the latter opens up risk for a retest to $64-$63.50 and the 50-day moving average.

RSI is flatlining resistance at 60.

A close above this level gets 65-70 and August peaks in play. Support is at 55-50 with a close below the latter signaling additional weakness.

The iShares PHLX Semiconductor ETF (SOXX) showed weakness for the 2nd-straight session after trading down to $167.61 intraday.

Near-term support at $167.50-$167 held with a close below the latter signaling additional weakness towards $165.50-$165.

Resistance is at $170.50-$171.

Continued closes above $172.50 would be a bullish setup for a possible push towards $175 and the 200-day moving average.

The 50-day moving average had been in a downtrend since early October but has leveled out this month and is showing signs of curling higher.

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

A close above the latter would be slightly bearish and signal additional weakness.

Resistance is at 60 with a move above this level signaling additional momentum.

Existing Position Update

Want to wait till after FOMC and APPLE earnings to initiate more exposure.
Expect volatility next few days.

Market is looking for directional bias ones again.
Earnings are worse than expected but FED data is better.

We may see more range bound non directional bias – especially if FED pushes rate hike back.

Roger Scott.