U.S. markets showed continued weakness after trading on both sides of the ledger before finishing mostly lower to start the week. Some of the morning strength came after U.S. Treasury Secretary Mnuchin said he’s cautiously optimistic of reaching an agreement on trade with China.

However, higher interest rates weighed on trading as the 10-year T-note yield climbed to a 4-1/4 year high of 2.99%. Although this shouldn’t be a big issue longer-term for the market, waiting for 3% to trigger has caused some recent nervousness.

The Nasdaq was down 0.3% after trading to an intraday low of 7,094 to extend its losing streak to 3-straight while below its 100-day moving average.

The Dow extended its losing streak to fourth-straight after declining 0.1% while trading to an intraday low of 24,328. The 24,000 level has been holding for 10-straight sessions with a third of the blue-chips reporting numbers this week.

The Russell 2000 slipped 0.1% following the backtest to 1,556 and a lower low than Friday.

However, the 50-day moving averages is on track to clear the 100-day moving average on renewed strength and would be a slightly bullish signal.

The S&P 500 was up less than a point, or 0.01% despite testing a late day low of to 2,657 to snap a two-session slide.

Energy and Health Care showed the most sector strength after gaining 0.6% and 0.4%, respectively. Technology led sector laggards after falling 0.4% while Materials were lower by 0.3%.

Global Economy – European markets were higher across the board despite mixed economic PMI news. France’s CAC 40 advanced 0.5% while the Stoxx 600 Europe and UK’s FTSE 100 rose 0.4%. Germany’s DAX 30 and the Belgium20 were up 0.3%.

The Eurozone April Markit manufacturing PMI fell 0.6 to 56, weaker than expectations of 56.1.

The Eurozone April Markit composite PMI was flat at 55.2, but ahead of forecasts for a reading of 54.8.

The German April Markit/BME manufacturing PMI slipped 0.1 to 58.1, but better than expectations of for a wider drop to 57.5.

Asian markets showed continued weakness with modest declines ro start rhe week. Hong Kong’s Hang Seng gave back 0.5% while Japan’s Nikkei and Australia’s S&P/ASX 200 declined 0.3%. South Korea’s Kospi and China’s Shanghai dipped 0.1%.

Bank of Japan Governor Haruhiko Kuroda said Japan will consider abandoning its ultraloose monetary policy as soon as inflation meets the 2% inflation target. However, he said in order to reach his 2% inflation target, he thinks the Bank of Japan must continue very strong accommodative monetary policy for some time.

Kuroda went on to add that within the next five years, Japan will reach the BOJ’s 2% inflation target, by which time the central bank will start discussing how to gradually normalize the monetary condition. He also addressed issues such as global trade and currency manipulation.

Chicago Fed National Activity Index fell to 0.10 in March, missing forecasts for a print of 0.29. This brought the 3-month average to 0.27 from 0.31. The report showed 44 of the 85 indicators made positive contributions, with 41 making negative contributions.

April manufacturing PMI rose 0.9 points to 56.5, topping expectations for a 55.2 reading. PMI Composite Flash came in at 54.8, above forecasts for a print of 54.1.

Existing Home Sales rose 1.1% to a rate of 5,600,000 units in March, beating expectations of 5,513,000 units sold. Single family sales were up 0.6% to 4,990,000 units, while multifamily sales rebounded 5.2% to 610,000.

Regionally, sales bounced in the Northeast (5.6%) and in the Midwest (5.3%) after weather related declines in February. Sales slipped in the West (-2.7%) and the South (-1.4%).

The months’ supply of homes edged up to 3.6 million from 3.4 million. The median sales price rose to $250,400 from $240,900.

Market Sentiment – San Francisco Fed President Williams said it makes sense to keep raising interest rates through next year given improvement in the economy.

The iShares 20+ Year Treasury Bond ETF (TLT) traded mostly in the red while testing a low of $118.08 before closing slightly higher into the closing bell.

Shaky support at $118-$117.50 held with a close below the latter likely leading to $116 and fresh February lows. Lowered resistance is at $118.75-$119.25 and the 50-day moving average.

Market Analysis – The Spider Small-Cap 600 ETF (SLY) closed higher for to snap a two-session slide while reaching a peak of $137.54. Near-term resistance at $137.50-$138 held with continued closes above the latter signaling a possible push towards $139-$140 and a return to all-time highs.

The January 24th record high tapped $139.70 with last Wednesday peak hitting $139.49.

Support is at $136-$135.50 with risk to $135-$134 and the 50-day moving average on a close below the latter.

We mentioned earlier this month the 50-day moving average was flattening out and is now back in a nice uptrend.

RSI is trying to correct itself from a mini downtrend with near-term support at 50. A close below this level would be a bearish signal for a continued backtest towards 40 and March support levels.

Resistance is at 60 and a level that held last week and the mid-March peak.

The Industrials Select Sector Spider (XLI) extended its losing streak to three-straight sessions after trading down to $75.15. Support at $75.25-$74.75 and the 50-day moving average held with a close below the latter being a slightly bearish signal.

Near-term resistance is at $75.75-$76.25 with continued closes above the latter signaling further strength.

RSI is trying to hold support at 50 and a level that served as major resistance in mid-March and earlier this month. A close below this level would be a bearish development.

Continued closes above this level could lead to a possible test towards 60.

Existing Position Update

Waiting for another day or two to initiate credit spread – few positions look very promising – but I’m waiting to see if SP can remain above 50 day line.

AAPL is weaker but price remains above our short strike price for the time being – expect price to stay firm – unless overall market tanks next few sessions.

TSLA remains promising – expect minor selling pressure and more volatility over the near term.

PANW remains mildly stable at this time. Expect more range bound action – with very little directional bias over the near term.

Roger Scott.