U.S. markets suffered steep losses to start the week amid renewed trade worries after China ratcheted up tariffs on a variety of U.S. goods over the weekend.

Volatility spiked on the possibility of an escalating trade war between the U.S. and China, which is not good for equities, but held resistance.

The Nasdaq tanked 2.7% after falling to an intraday low of 6,805 to close back below the 7,000 level while giving up its gains for 2018. The Russell 2000 tumbled 2.4% after tapping a low of 1,482 to close back below its 1,500 level for the first time since mid-February.

Both indexes held their 200-day moving averages.

The S&P 500 sank 2.2% after trading to a low of 2,553 while closing below its 200-day moving average.

The Dow stumbled 1.9% after testing a fresh 2018 low of 23,344 but was able to hold its 200-day moving average into the closing bell.

Consumer Discretionary led sector laggards after dropping 2.8%. Consumer Staples gave back 2.5% while Technology was down 2.4%. There were no sectors that showed strength.

Global Economy – European markets were closed for Easter Monday.

Asian markets were mostly lower aside from Hong Kong’s Hang Seng which added 0.2%. Australia’s S&P/ASX 200 fell 0.5% and Japan’s Nikkei declined 0.3%.

China’s Shanghai slipped 0.2% and South Korea’s Kospi dipped 0.1%.

China’s manufacturing PMI rose to 51.5 in March, up from 50.3 in February and above the 50.5 anticipated by analysts.

China’s services PMI climbed to 54.6 in March from 54.4 in the prior month.

ISM’s manufacturing index fell 1.5 points to 59.3 for March from a 14-year high of 60.8 in February but below expectations for a print of 60.

Markit’s manufacturing PMI rose 0.3 points to 55.6 in the final March reading and a tad below expectations of 55.7.

Construction Spending was up 0.1% in February, below forecasts for a rise of 0.5%.

Market Sentiment – Fedspeak returns this week, highlighted by Chairman Powell’s economic outlook on Friday. Kashkari will be speaking on monetary policy and the economy later this evening.

He will also be at a regional economic forum on Tuesday while Governor Brainard will be speaking on financial stability.

Bullard discusses monetary policy and the economy on Wednesday while Fed Mester comments on diversity in economics.

Fed Bostic speaks on financial literacy on Thursday while Fed Charles Evans is scheduled to speak on policy and the economy on Saturday.

The iShares 20+ Year Treasury Bond ETF (TLT) extended its win streak to four-straight sessions following today’s push to $122.36. Resistance at $122-$122.50 and the 100-day moving average held into the closing bell.

Support remains at $121.50-$121 with a close below the latter signaling a short-term top.

Market Analysis – The PowerShares QQQ (QQQ) fell for the fifth-time in seven sessions after tapping an intraday low of $153.88.

Fresh support from early-February at $154-$153.50 held with a move below the latter likely leading to a further backtest to $152.50-$152 and the 200-day moving average.

Lowered resistance is at $156-$156.50.

RSI is back in a downtrend after failing resistance at 40. Early February and March support is at 32-30.

The Real Estate Select Sector Spider (XLRE) pulled back for the second-straight session after trading down to $30.48. Support at $30.50-$30.25 held with a close below the latter signaling additional weakness.

Resistance is at $31-$31.25 with a close back above the latter being a slightly bullish development.

RSI is in a slight downtrend and is trying to hold support at 50. A close below this level would signal additional weakness and a possible backtest to 40 and March support.

Resistance is at 55-60.

Existing Position Update

Today’s trading action is what caused me to pause in initiating TSLA late last week. Market was not stable and the massive non directional volatility we are seeing is causing increased fear in the overall market.

TSLA appears to have bottomed a bit more – but based on the news from the company and technical levels, I do believe the worst is behind us – at least for the time being. I’m expecting reasonable corrective pressure over the near term – especially based on the momentum the stock is capable of generating.

BABA is trading lower but above our strike price for the time being. I would be increasingly concerned if price was at the current level and the overall market just began correcting. However, when you consider that we are testing the 200 day line in the broader market and the fact that the option has some time left, I wouldn’t be too concerned about it at this time.

I’m looking at a few more positions but want to give the market a chance to bottom out – which will happen when volatility is lower.

Expect current global tension with tariffs and trade war to be priced in before end of the week and earnings begin nominating once again.

The expectation is better than expected and I’m looking for more upside over the near term.

Roger Scott