U.S. markets opened slightly lower on the final day of trading for May and were choppy during the first hour of action.
The selling pressure picked up in the second hour of trading after it was confirmed that the U.S. would impose steel and aluminum tariffs on imports from Mexico, Canada and the EU. Volatility heightened while holding a key level of resistance ahead of Friday’s jobs report.
The Dow dropped 1% after testing a low of 24,352 but was able to hold its 50-day moving average for a second-straight session.
The S&P 500 fell 0.7% on the pullback to 2,700 and a level that has held in 14 of the past 15 sessions.
Both indexes traded in negative territory throughout the session. For the month, the Dow was up 1% while the S&P 500 added 2.1%.
The Russell 2000 gave back 0.9% after testing a low of 1,632 intraday. The small-caps came within 2 points of setting another all-time high on the open.
The Nasdaq slipped 0.3% after trading to a low of 7,431 while easily holding the 7,400 level. Tech traded to its highest level of the month intraday after peaking at 7,492.
For the month, the Russell 2000 surged 5.6% while the Nasdaq jumped 5.3%.
Utilities were the only sector that closed in the green after rising 0.2%. Consumer Staples and Industrials led sector laggards after sinking 1.6% and 1.5%, respectively.
For the month, Technology surged 6.8% while Industrials surged 4.6%. Energy was added 3.8% while Materials rose 2.9%.
Utilities were down 1.3% and Financials slipped 0.2% and were the only laggards for May.
Global Economy – European markets were lower across the board on the final day of trading in May as Spain’s Prime Minister Mariano Rajoy faces the possibility of being forced out of office.
Germany’s DAX 30 sank 1.4% and the Stoxx 600 Europe was lower by 0.6%.
The Belgium20 and France’s CAC 40 fell 0.5% while UK’s FTSE 100 slipped 0.2%.
The Eurozone May CPI estimate rose 1.9% year-over-year, stronger than expectations of 1.6%. The May core CPI rose 1.1%, topping forecasts of 1%.
The Eurozone April unemployment rate declined 0.1% to 8.5%, higher than expectations of 8.4%.
Asian markets closed higher with the Chinese markets ending a streak of six-straight days of declines.
China’s Shanghai jumped 1.9% and Hong Kong’s Hang Seng rallied 1.4%.
Japan’s Nikkei rose 0.8% and South Korea’s Kospi advanced 0.6%. Australia’s S&P/ASX 200 was up 0.5%.
The China May manufacturing PMI unexpectedly rose 0.5 to 51.9, ahead of forecasts for no change at 51.4 and the fastest pace of expansion in 8 months.
May Challenge Job-Cut Report announced layoffs at 31,517.
Jobless Claims were at 221,000, missing forecasts of 224,000.
The May Chicago PMI Index came in at 62.7, well above expectations of 58.4.
April Pending Home Sales were down 1.3% versus expectations of 0.4% for the month.
Market Sentiment – Fed Governor Lael Brainard says she is in favor of gradual rate hikes that she said would eventually move into moderately restrictive territory.
She said the Trump tax cut and higher federal spending is going to reinforce above-trend growth.
Brainard seemed not especially bothered by a flattening yield curve, with short-dated yields rising more quickly that those at the long end. She added that special factors were weighing on the yield curve, including the Fed’s bond-buying program in the wake of the financial crisis.
The iShares 20+ Year Treasury Bond ETF (TLT) closed higher for the fifth-time in six sessions following the late session push to $121.98.
Resistance at $121.75-$122.25 and the 200-day moving average held with a close above the latter being a continued bullish development. Rising support is at $121-$120.50 with a close below $120 signaling a short-term top.
Market Analysis – The PowerShares QQQ (QQQ) is trying to breakout of a tight trading range between $167-$171 that has last since early May.
The intraday high tapped $171.20 with early January, mid-March and May resistance at $170.50-$171 holding into the closing bell. Continued closes above the latter would be a bullish signal for a possible run towards $172-$174.
The all-time high is at $175.21 from early March.
Near-term support is at $169.50-$169 with a move below the latter likely signaling additional weakness towards $167.50 and a short-term top.
A triple-top breakout, or breakdown, is still in progress. The longer the current trading range continues, the bigger the breakout, or breakdown, will be.
The 50-day moving average has been flatlining since mid-April with the 200-day moving average remaining in a longer-term uptrend.
RSI is trying to clear and hold March and May resistance at 60-65. Continued closes above the latter would be a bullish signal for a run towards 70-75 and December and January resistance.
Support is at 55-50 with a move below the latter likely leading to a further backtest towards 40 and late April support.
The Spider S&P Retail ETF (XRT) slipped for just the second time in six sessions after testing a high of $47.39 shortly after the open.
Mid-month resistance is at $47-$47.25 held with a close above $47.50 being a bullish signal for higher highs.
Support is at $46.25-$46 with a move below the latter likely signaling additional weakness. Both the 50-day and 200-day moving averages are currently in solid uptrends.
RSI pulled back with May support is at 50. A close below this level could led to a continued backtest towards 45-40 and late March support levels.
Multi-month resistance is at 55-60.
A move above the latter would be a bullish development for another possible run towards 70 and longer-term resistance from January that was challenge in mid-May.
Existing Position Update
I’m being patient as volatility rises once again.
PYPL appears to be peaking out near the current price level.
Targeting two iron condor spreads. Expect trade tomorrow before the closing bell.
Keep your eye out for my SMS alert and email…during second part of the session.