U.S. markets were weak from the start of Monday’s open with the nervousness being blamed on a second tariff list on Chinese goods.
The brewing trade war between the U.S. and China will remain in focus as there won’t be much economic or earnings news to help the market this week.
The small-caps showed strength within an hour of trading and provided a good hint losses could be limited.
However, volatility continues to hold key levels of resistance throughput the month and is still showing signs of relaxing to lower lows.
The Dow extended its losing streak to 5-straight sessions after falling 0.4% and testing a low of 24,825. Major support at 25,000 was breached on the close below this level with backup help at 24,800 holding.
The Nasdaq traded in the red for much of the session with the low reaching 7,676. The index held the 7,700 level 4th time in 5 sessions after climbing less than a point, or 0.01%, into the closing bell.
The S&P 500 was down for the 2nd-straight session after giving back 0.2% following the intraday backtest to 2,757.
Crucial support at 2,750 held with a close below this level getting 2,725-2,700 back in play.
The Russell 2000 was up 0.5% despite the opening fade to 1,674. The index showed strength shortly afterwards while closing above 1,692 and another all-time high as the final bell sounded.
Energy exploded 1% to the upside while Utilities and Technology rose 0.3% and 0.1%, respectively, and were the only sectors that closed in positive territory.
Consumer Staples were slammed for 1.5% to pace sector losers while Health Care sank 1%. Industrials were off 0.4%.
Global Economy – European markets closed lower after Angela Merkel’s tenure as Germany’s chancellor continued to come under pressure over immigration issues.
Germany’s DAX 30 stumbled 1.4% and the Belgium20 tumbled 1.1%. France’s CAC 40 fell 0.9% and the Stoxx 600 Europe was lower by 0.8%. UK’s FTSE 100 dipped just over 2 points, 0.03%.
Merkel’s fragile coalition is under continued scrutiny over migrant issues that prompted increasing concerns that the government could falter.
The German chancellor was handed a two-week ultimatum by her coalition partners to secure a deal on migrants with the country’s European neighbors.
Asian markets closed mostly lower as the trade conflict between the U.S. and China remained in focus.
South Korea’s Kospi sank 1.2% and Japan’s Nikkei was off 0.8%.
China’s Shanghai slid 0.7% while Hong Kong’s Hang Seng was down 0.4%. Australia’s S&P/ASX 200 climbed 0.2%.
The Japan May trade balance was reported at a deficit of 578.3 billion yen, much worse than expectations of -205.2 yen. May exports rose 8.1% year-over-year, stronger than forecasts of 7.5%.
May exports rose 14%, stronger than estimates for a rise of 8%.
The NAHB Housing Market Index slipped 2 points to 68 in June, reversing the 2 point increase in May to 70 and below expectations to remain stable.
The report indicated record high lumber prices as a headwind. All the components fell 1 point, taking the single family index to 76 from 77, the future sales index to 76 from 77, and the index of prospective buyer traffic to 50 from 51.
Market Sentiment – NY Fed President Williams said he’s committed to openness and transparency in his first public statement after taking on his new position.
He also said he would continue to make monetary policy recommendations based on what he believes is in the best interest for the economy. Williams said he would strive to explain his reasoning, particularly when his views may differ from those of others.
The iShares 20+ Year Treasury Bond ETF (TLT) showed some strength on the open after pushing a peak of $120.56. Lower resistance at $120.50-$121 was stretched but held.
Upper support at $120-$119.50 held firm on the fade to $120.04 afterwards with a move below $119 and the 50-day moving average being a slightly bearish signal.
Market Analysis – The PowerShares QQQ (QQQ) were weak throughout the session while bottoming at $174.94 intraday. Near-term support at $175-$174.50 held with a move below $174 signaling a short-term top.
This area also represents the prior early March record high.
We mentioned a few weeks ago continued closes above the $175 level would get $177-$177.50 in play on additional momentum.
Last week’s all-time peak reached $177.89 with continued closes above $178 getting $180+ in the mix.
RSI has been trying to hold February and March resistance at 70 with a close back above this level being a slightly bearish sign.
Resistance is at 70-75 with a move above the latter keeping January highs in play.
The Consumer Discretionary Select Spiders (XLY) traded down to $111.16 while closing lower for the first time in a dozen sessions. Near-term support at $111-$110 held with a move below the latter signaling a short-term peak.
Resistance is at $112-$112.25 with last week’s all-time high tapping $112.24. A possible run towards $114-$115 could come on continued close above the $112.50 level.
RSI recently pushed December and January resistance at 80 with continued closes above this level being a slightly bullish signal for a possible run towards 85-90 and very overbought levels.
Existing Position Update
AMZN remains choppy and price is below our short strike price to the upside for the time being.
The trend in PYPL appears to be fizzling out. I’m seeing congestion and sideways trading action over the next few sessions.
Should have another condor or credit spread over the next few sessions.
It appears that the overall market is shrugging off trade war…or trying to for the time being.
With FED increasing rates and with increased uncertainty, the stock market is going to have to show impressive FED and earnings data to continue trading higher over the next few quarters.
Roger Scott