U.S. markets showed opening weakness to push fresh weekly lows into the first half of action before making a strong push afterwards to finish mixed.

The breakthrough into positive territory during the second half of action showed signs of a possible bottoming process and comes ahead of Friday’s employment numbers. Volatility spiked on the choppy action but held key levels of resistance on the session lows.

The Russell 2000 was down 0.5% after trading to a low of 1,532 while closing back below its 50-day moving average. The small-caps also held its Tuesday low of 1,527 and was a slightly bullish signal.

The Nasdaq gave back 0.2% following a morning and weekly low of 6,991 but has been holding crucial support at the 7,000 level for 18 sessions.

Tech remains trapped between its 50/200-day moving averages.

The S&P 500 stumbled 0.2% after trading to a low of 2,594 before holding 2,600 into the closing bell. The level has been holding since April 3rd with risk to 2,575-2,550 on a close below 2,600.

The Dow was up 5 points, or 0.02% despite trading down to 23,531 while closing below the 24,000 level for the 2nd-straight day. Both the Dow and S&P 500 breached their 200-day moving averages and weekly lows but levels that held into the closing bell.

Materials gained 0.5% while Technology and Industrials were higher by 0.2% and were the only sector winners. Health Care and Financials led sector laggards after bleeding 1% and 0.9%, respectively.

Global Economy – European markets were lower across the board on concerns over the slow pace of inflation which is dovish for ECB monetary policy.

The Belgium20 sank 1.3% and Germany’s DAX 30 dropped 0.9%. The Stoxx 600 Europe was off 0.7% while France’s CAC 40 and UK’s FTSE 100 fell 0.5%.

Eurozone March PPI rose 0.1% month-over-month and 2.1% year-over-year, matching expectations.

The Eurozone April CPI estimate rose 1.2% year-over-year, weaker than expectations of 1.3%. April core CPI rose 0.7% year-over-year, weaker than forecasts of 0.9%.

The UK April Markit/CIPS services PMI rose 1.1 to 52.8, missing forecasts of 53.5.

Asian markets closed mostly in the red as U.S trade talks with China gets underway with representatives from both sides dialing back expectations for a breakthrough.

China said it won’t agree to preconditions for trade talks while Trump representatives said they might leave the talks early if no common ground is found.

Hong Kong’s Hang Seng tumbled 1.3% and South Korea’s Kospi gave back 0.8%. Australia’s S&P/ASX 200 dropped 0.7% and Japan’s Nikkei declined 0.2%. China’s Shanghai gained 0.7%.

Challenge Job-Cut Report announced layoffs of 36,081.

International Trade in Goods deficit narrowed 15.2% in March but is still $49 billion in the hole. Imports fell 1.8% to $257.5 billion while Exports increased 2% to $208.5.

The real goods balance narrowed to -$62.1 billion with imports falling 1.6% and exports up 2.9%. The trade deficit with China was at $25.9 billion while the balance with Canada moved to a $300 million surplus from -$400 million.

Jobless Claims climbed 2,000 to 211,000 in the week ending April 28th. This brought the 4-week average to 221,500 from 229,250. Continuing claims dropped 77,000 to 1,756,000 in the April 21st week, representing the lowest since late 1973.

Productivity rose 0.7% with Costs up 2.7%. For Q1, output was up 2.8% versus 3.7% previously, with hours at 2.1% from 3.3%. Compensation per hour rose to a 3.4% pace from 2.4%. Real compensation slipped 0.1%.

PMI Services Index for April checked in at 54.6, topping expectations of 54.4.

Factory Orders were up 1.6% in March versus forecasts consensus of 1.3%.

ISM Non-Manufacturing Index fell 2 points to 56.8 in April versus forecasts for a print of 58.4. The employment component slid to 53.6 from 56.6.

However, new orders improved to 60 after falling to 59.5 previously. New export orders increased to 61.5 from 58 while imports slipped to 54.5 from 55. Prices paid edged up to 61.8 from 61.5.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) snapped a two-session slide after reaching an intraday peak of $119.31.

Upper resistance at $119-$119.25 and the 50-day moving average held with continued closes above the latter being a slightly bullish signal for a run at $120. Rising support is at $118.50-$118.25.

Market Analysis – The Spider S&P 500 ETF (SPY) stumbled to a morning low of $259.05 with support at $259.50-$259 and the 200-day moving average holding.

A close below the latter would be a bearish development with downside risk towards $257.50-$255 and the beginning of April lows.

The rebound to $263.36 afterwards keeps near-term resistance at $263-$263.50 in play.

RSI has been in a downtrend with support at 40 from early April holding. A move below this level would signal a possible retest to 35-30 and February/ March lows. Resistance is at 45-50.

The Health Care Select Sector Spider (XLV) fell for a 4th-straight session after testing an intraday low of $79.31. Support at $79.50-$79 held with a close below $78.75 possibly representing a shorting opportunity.

The beginning of April low tapped $78.74 and the 52-week low is at $74.45. Lowered resistance is at $80.75-$81.25.

We mentioned in early April the 50-day moving average was on track to fall below the 200-day moving average to form a bearish death-cross.

Although the 50-day moving average had flattened out in mid-April, this technical setup is back in play.

RSI is trying to hold near-term support at 40 with risk towards 30 and February/ March lows on a close below this level. Resistance is at 45 and the late April high.

Existing Position Update

TSLA started the session ultra but ended the session in a much stronger position.

PANW remains in range. Expect more congestion especially with price remaining below 50 day line on the major indices.

AAPL remains stable after earnings and we can expect price to remain range bound near the current price level in the near term.

Roger Scott