U.S. markets showed strength on Wednesday’s open before turning south afterwards and showing weakness for the 5-straight session.

The rebound off the lows was slightly encouraging but October lows remain in play.

A death-cross has officially formed in the small-caps for the first time in 2 1/2 years and remains a concern. Meanwhile, volatility spiked to its highest level of the month but held key levels of resistance.

The Nasdaq was down 0.9% after testing an intraday low of 7,101.

Late October support at 7,100-7,050 held with a close 7,000 likely leading to additional selling pressure.

The S&P 500 was lower by 0.8% following the pullback to 2,685. Upper support at 2,700-2,675 held with risk to 2,625-2,600 and October lows on a close below the latter.

The Dow declined 0.8% after trading to an intraday low of 24,935.

Fresh and upper support at 25,000-24,800 held but the close below the 200-day moving average was a slightly bearish development.

The Russell 2000 also fell 0.8% after tapping a session low of 1,494. Upper support at 1,500-1,490 was breached with a close below the latter likely getting 1,480-1,460 in play.

Communication Services gained 0.5% and was the only sector that closed in positive territory.

Financials tanked 1.4% and Technology was down 1.2% to lead sector weakness.

Utilities fell 1% while Healthcare and Consumer Discretionary stumbled 0.8%.

Global Economy – European markets closed lower despite a key breakthrough between Britain and the EU on a possible Brexit deal.

Prime Minister May asked her divided Cabinet ministers to back her Brexit deal or quit.

France’s CAC 40 was off 0.7% and the Stoxx 600 Europe fell 0.6%.

Germany’s DAX 30 dropped 0.5% while UK’s FTSE 100 and the Belgium20 gave back 0.3%.

Eurozone Q3 GDP was left unrevised at 0.2% quarter-over-quarter and 1.7% year-over-year.

Eurozone September industrial production slipped 0.3% month-over-month and was up 0.9% year-over-year, topping forecasts for a decline of 0.4% and a gain of 0.3%, respectively.

German Q3 GDP dipped 0.2% for the quarter but was up 1.1% year-over-year, weaker than estimates for a dip of 0.1% and 1.2%.

UK October CPI rose 0.1% month-over-month and 2.4% year-over-year, below expectations of 0.2% and 2.5%, respectively.

October core CPI rose 1.9% year-over-year, matching expectations.

Asian markets settled mostly lower on weaker-than-expected economic news out of Japan and China.

Australia’s S&P/ASX 200 sank 1.7% and China’s Shanghai gave back 0.9%.

Hong Kong’s Hang Seng fell 0.5% and South Korea’s Kospi was lower by 0.3%. Japan’s Nikkei climbed 0.1%.

Japan Q3 GDP fell 1.2%, missing forecasts for a drop of 1%. The Q3 GDP deflator fell 0.3% year-over-year, weaker than expectations for a dip of 0.1%.

China October industrial production rose 5.9%, topping estimates of 5.8% year-over-year.

China October retail sales were up 8.6%, missing forecasts of 9.2%.

U.S. Economy

MBA Mortgage Applications were down 3.2%, along with a 2.3% drop in the purchase index, and a 4.3% decline in the refinancing index for the week November 9th.

The average 30-year fixed rate increased 2 basis points to 5.17%.

October Consumer Price Index rose 0.3% in October with the core rate up 0.2%, matching forecasts.

The 12-month pace for total CPI was 2.5% year-over-year in October, up from 2.3% in September while the core slowed to a 2.1% year-over-year rate from 2.2%.

Real average hourly earnings grew at a 0.7% year-over-year pace versus September’s 0.5% rate of increase.

November Atlantic Fed Business Inflation Expectations were up 2.2% year-over-year.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) pushed a fresh weekly high of $114.52 with lower resistance at $114.50-$115 and the 50-day moving average holding.

Continued closes above the latter would be a slightly bullish signal.

Near-term support remains at $113.50-$113 with a move below the latter being a slightly bearish signal.

Market Analysis – The Spider Small-Cap 600 ETF (SLY) fell for the 5th-straight session after showing early morning strength and making a run to $68.56.

Lower resistance at $68.50-$69 held before the fade to $67.11.

Near-term support is at $67-$66.75 with a close below the latter likely signaling continued selling pressure.

The 50-day moving average remains on track to fall below the 200-day moving average and would form a death cross if complete.

This is typically a bearish technical setup for lower lows.

RSI is pushing support at 35-30.

A close below the latter would likely get October lows in the 20’s back in play. Resistance is at 40.

The Spider S&P Retail ETF (XRT) extended its losing streak to 4-straight sessions despite testing a session high of $49.12 shortly after the open.

Resistance at $49-$49.25 and the 50-day moving average held with continued closes above the latter being a more bullish development.

The backtest to $47.28 and close back below the 200-day moving average was a slightly bearish development.

Fresh support is at $47.25-$47 with a close below the latter signaling additional weakness.

RSI is in a downtrend with support 40. A move below this level opens up risk towards 35-30. Resistance is at 45-50.

Existing Position Update

Markets are volatile but are not directional.

I’m increasing balance between puts and calls next few sessions.

Expect market to hover near the 200 day line till FED data and retail earnings are behind us.

Roger Scott