U.S. markets showed weakness for a 5th-straight session while wrapping up their worst week of the year following a weak jobs report.

Although the headline number was much weaker than expected, there were several components that were solid, along with housing data that was also released.

The major indexes were able to rally off their morning lows and made a feverish push towards positive territory in the final hour of trading.

Early February support levels were tested and remain in play with volatility spiking to a fresh monthly high before settling lower for the session.

The Nasdaq declined 0.2% after testing an opening low of 7,332. Prior and upper support at 7,325-7,275 held with risk to 7,200-7,150 and the 50-day moving average on a move below the latter.

The S&P 500 also slipped 0.2% following the morning pullback 2,722.

Early February and upper support at 2,725-2,700 was breached but held on the 2nd-straight close below the 200-day moving average.

The Russell edged down 0.1% after tapping a morning low of 1,510.

Prior and upper support at 1,510-1,500 was tripped but held with a move below the latter getting 1,485-1,475 and the 50-day moving average in play.

The Dow also dipped 0.1% following the drop to 25,252 shortly after the opening bell.

Fresh and upper support at 25,250-25,000 and the 200-day moving average held with backup help at 24,800 and the 50-day moving average.

For the week, the Russell plummeted 4.6% while the Nasdaq tanked 2.5%. Both the S&P 500 and the Dow dropped 2.2%.

Utilities led sector strength after rising 0.4% while Materials added 0.2%. Energy tumbled 1.9% to easily lead sector laggards while Consumer Discretionary fell 0.7%.

Utilities and Real Estate were the only sectors that closed in the green for the week, gaining 0.7% and 0.4%, respectively.

Healthcare and Energy were hit for weekly losses of 3.8% while Industrials and Financials stumbled 2.8% and 2.7%, respectively.


Still no update…

Global Economy – European markets closed lower despite somewhat encouraging news on Brexit. U.K.’s Foreign Minister Jeremy Hunt there has been progress in Brexit talks over the last few days.

He said there is a bit more to make and it’s entirely possible to get there as pressure continues to mount ahead of the March 29th deadline.

The Belgium20 sank 1% and the Stoxx 600 Europe declined 0.9%. UK’s FTSE 100 and France’s CAC 40 were down 0.7% while Germany’s DAX 30 fell 0.5%.

German manufacturing orders declined 2.6% in January, missing forecasts of a 0.5% increase.

Asian markets settled with heavy losses on news China’s exports fell sharply last month, likely reflecting weaker demand, but with distortions from the Lunar New Year holiday.

China’s Shanghai plunged 4.4% and Japan’s Nikkei tumbled 2%. Hong Kong’s Hang Seng tanked 1.9% and South Korea’s Kospi gave back 1.3%. Australia’s S&P/ASX 200 fell 0.9%.

China exports tumbled 20.7% from a year earlier in February, after jumping 9.1% in January.

Expectations were for a drop of 6%. Imports fell 5.2% following January’s 1.5% pullback, versus forecasts for a 2.5% decline.

China’s total trade surplus stood at $4.12 billion, down sharply from the $39.16 billion surplus in January and undershooting forecasts of $24.45 billion.

Nonfarm payrolls increased a mere 20,000 in February, much weaker than forecasts of 178,000. The unemployment rate fell to 3.8% versus 4%.

Average hourly earnings rose 0.4%, the best in nearly 10 years, from 0.1%. Earnings accelerated to a 3.4% year-over-year pace from 3.1%.

Hours worked dipped to 34.4 from 34.5 previously. The labor force declined 45,000 after dropping 11,000 in January, while household employment bounced 255,000, offsetting January’s 251,000 drop.

The labor force participation rate was steady at 63.2%.

Private payrolls increased 25,000 (183k,000 ADP), with the goods producing sector subtracting 32,000, with a 31,000 drop in construction jobs, while manufacturing was up 4,000.

The service sector added 57,000 with government employment down 5,000.

Housing Starts jumped 18.6% to 1,230,000 in January following a 14% drop to 1,037,000 in December. Expectations were for a print of 1,170,000.

Starts are down 7.8% year-over-year, but at a slower pace of contraction versus -14.3% previously. Building permits were up 1.4% to 1,345,000.

Single family starts climbed 25.1% versus -8.4% while multi-family starts increased 2.4% from -25.4%. Starts were up in 3 of the 4 regions covered, with a 58.5% jump in the Northeast, a 29.3% surge in the West, a 13.8% increase in the South, and a 5.7% drop in the Midwest.

Baker-Hughes reported the U.S. rig count was down 11 rigs from last week to 1,027 rigs, with oil rigs down 9 to 834 and gas rigs down 2 to 193.

The U.S. Rig Count is up 43 rigs from last year’s count of 984, with oil rigs up 38 and gas rigs up 5. The U.S. Offshore Rig Count was unchanged at 22 rigs and is up 9 rigs year-over-year.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) extended its winning streak to 5-straight sessions after trading to a high of $121.69.

Prior and lower resistance from late February at $121.50-$122 was cleared and held with a move above the latter signaling additional momentum.

Rising support is at $121-$120.50 and the 50-day moving average.

RSI is in a strong uptrend and is approaching resistance at 60. A move above this level could lead to a continued run towards 65-70. Support is at 55-50.

Market Analysis – The Invesco QQQ Trust (QQQ) was lower for the 3rd-straight session following the pullback to $169.34. Near-term support at $169.50-$169 held with a move below the latter opening up risk towards $167.50-$165 and the 50-day moving average.

Near-term resistance is at $171.50-$172 and the 200-day moving average.

A close above $172.50 would be a more bullish signal with upside momentum towards $174.50-$175 and highs from earlier this month.

RSI is trying to level out with near-term support at 50. There is risk towards 45-40 on a move below this level with the latter representing early January support.

Resistance is at 55-60 with a close above the latter signaling a return of momentum.

The Real Estate Select Sector Spider (XLRE) has been in a mini-trading range for 4-straight sessions with Friday’s peak reaching $34.99. Near-term resistance at $35-$35.25 held with the latter representing the peak of a longer-term trading range since mid-February.

Continued closes above $35.25 and the recent 52-week high of $35.22 would be a bullish signal for additional strength and breakout towards $36-$37.50.

Current support is at $34.50-$34.25 with a move below $34 signaling additional weakness.

RSI is has been flatlining near the 60 level since late February.

Resistance is at 65 with a move above this level leading to a possible run towards 70-75 and prior peaks from late January and mid-February. Support is at 55-50 on a close below 60.

The percentage of Nasdaq 100 stocks trading above the 200-day moving average closed Friday at 57.28% with the session low at 55.33%. Mid-February and upper support is at 55%-52.50% held.

A move below the 50% level would be a slightly bearish signal for additional weakness.

Near_term resistance is at 57.50%-60%. A move above the latter would be a slightly bullish development and signal a return of momentum with upside potential towards 62.50%-65%.

The percentage of S&P 500 stocks trading above the 50-day moving average settled at 75% with the session low reaching 64.06%.

Late January and upper support at 65%-60% held following overbought signals for 2-weeks with a move below the latter signaling additional weakness. Near-term resistance is at 77.50%-80%.

Existing Position Update

Markets are turning the corner and bulls are getting a chance to take control once again.

Put / Call ratio is overdone and closing near highs is a step in the right direction.

I want to increase exposure and balance out the portfolio – but it will have to wait till stocks are slightly overbought.

Hopefully, this week will give us chance to initiate either bear call spreads or iron condors.

Roger Scott.