U.S. markets continued a whipsaw week after trading in and out of positive throughout the session. The late day rebound off the intraday lows was a slightly bullish signal as the major indexes closed higher for the 2nd-straight session.

Debate continues whether this is a true measure of sentiment between the holidays or a buying opportunity into the correction.

However, this won’t be known until volumes pick back up and any clarity emerges on the government shutdown and U.S.-Sino trade negotiations in January.

The Dow rose 1.1% after trading to an intraday high of 23,138.

Upper resistance at 23,200-24,400 held with continued closes above the latter being a bullish signal.

The S&P 500 added 0.9% despite the pullback to 2,397.

Support at 2,400-2,375 held with a move below the latter getting 2,350 and fresh 52-week lows back in play.

The Nasdaq rose 0.4% after testing a session peak of 6,583.

Near-term resistance at 6,600-6,650 held with a move above the latter being a continued bullish development.

The Russell 2000 was higher by 0.2% despite the pullback to 1,289.

Support at 1,300-1,275 was split but held held with a move below the latter getting 1,250 and 1-year lows back in play.

Materials soared 1.8% to led sector strength.

Industrials and Financials jumped 1.3% and 1.2%, respectively.

There was no sector weakness for the 2nd-straight session.

Global Economy – European markets closed lower across the board.

Germany’s DAX 30 sank 2.4% and the Stoxx 600 Europe stumbled 1.7%. UK’s FTSE 100 was off 1.5% and the Belgium20 declined 1.4%. France’s CAC 40 fell 0.6%.

The ECB said looking ahead, the incoming information remains overall consistent with an ongoing economic expansion, albeit with increased downside risks.

Asian markets settled mixed after the People’s Bank of China said in a statement about its Q4 policy meeting that it will keep prudent monetary policy and strike a balance between tightening and easing.

Japan’s Nikkei zoomed 3.9% and Australia’s S&P/ASX 200 jumped 1.9%. Hong Kong’s Hang Seng was down 0.7% and China’s Shanghai declined 0.6%. South Korea’s Kospi dipped 0.2% while

China November industrial profits fell 1.8% year-over-year, the first decline in nearly 3 years.

Japan November construction orders sank 10.7% year-over-year, the 2nd-straight month orders have declined.

Japan November annualized housing starts slipped 0.6% year-over-year to 957,000 annualized, matching expectations.

Initial Jobless Claims were down 1,000 to 216,000, just below expectations of 217,000. This left the 4-week average at 218,000 versus 222,750.

On a not seasonally adjusted basis, claims increased nearly 30,000 to 285,180 after dropping 6,000 to 255,195 previously. Continuing claims declined 4,000 to 1,701,000 following the 44,000 increase to 1,705,000 previously.

The FHFA House Price Index for October was up 0.3% to 267.9, versus estimates for a rise of 0.2%. The index is up 5.7% year-over-year although the pace of price appreciation has been slowing, with the current 12-month clip down from the 6.9% rate.

Seven of the 9 census divisions posted gains on the month, led by the Pacific (1.4%) and West North Central (1.1%). The South Atlantic (-0.6%) and the Middle Atlantic (-0.2%) posted declines.

However the 12-month changes were positive for all nine regions, ranging from 8.5% year-over-year in the Mountain to 3.3% in the Middle Atlantic divisions.

Consumer Confidence plunged 8.3 points to 128.1 in December, missing forecasts for a print of 134. The present situations component fell to 171.6 from 172.7 in November.

The expectations index tumbled to 99.1 from 112.3 while the labor market differential improved marginally to 34.6 from 34.2. The 12-month inflation index softened to 4.3% from 4.7%.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) was up for just the 2nd time in 5 sessions after making an intraday run to $121.38.

Resistance at $121.25-$121.75 was cleared but held with a close above $122 being a more bullish signal for higher highs.

Lower support at $120.50-$120 was breached but held on the late day fade to $119.99. A close below $119.50 would be a slightly bearish signal.

Market Analysis – The Invesco QQQ Trust (QQQ) was up for the 2nd-straight session despite the intraday backtest to $147.08. Upper support at $147-$146.50 held with a move below the latter signaling additional weakness towards $145-$143.50 and new 52-week lows.

Fresh resistance at $153.50-$154 held on the rebound to $153.18 ahead of the closing bell.

The 50-day moving average remains in a nasty downtrend after falling below the 200-day moving average at the start of the month. This remains a slight warning sign until cleared and recovered.

RSI is in a slight uptrend with resistance at 45. A close above this level would signal additional strength towards 50-55. Support is at 40-35.

The Consumer Staples Select Spiders (XLP) closed higher for the 2nd-straight session after bottoming at $49.04. Upper support is at $49-$48.50 held.

A close back below the latter would be a bearish signal for continued weakness with the recent 52-week low at $48.33.

Fresh and lower resistance at $50.50-$51 was cleared and held on the bounce to $50.61.

Continued closes above the latter would be a slightly bullish signal that a possible near-term bottom is in.

RSI is in an uptrend with resistance at 35-40.

A close above the latter could lead to continued strength towards 45-50 and the mid-month peak. Support is at 30.

Existing Position Update

Volatility not going away anytime soon – but price is moving higher on majority of positions.
I’m expecting two sided market action next few days.

I may initiate new position next few sessions since markets are oversold IMHO.

I will update you tomorrow as usual.

Roger Scott