U.S. markets showed weakness for the first time in 5 sessions as trade war concerns resurfaced.

Tech and the small-caps showed some midday strength but weakened after President Trump said he would like to move ahead with imposing tariffs on $200 billion in Chinese imports as soon as next week.

President Trump also accused China of undermining U.S. efforts to get North Korea to give up its nuclear weapons, which may further exacerbate trade tensions with China.

Volatility spiked 10% after closing above a key level of resistance.

The Russell 2000 slipped 0.2% despite tagging a fresh record high of 1,740 during the second half of action.

Near-term support at 1,725-1,720 held on the morning backtest to 1,728 with a close below the latter being a slightly bearish signal.

The Nasdaq was down 0.3% while trading to an all-time high of 8,133 intraday.

The pullback to 8,069 ahead of the closing bell held near-term support at 8,050-8,000.

The S&P 500 fell 0.4% while testing a session low of 2,895. Upper support at 2,900-2,875 held with a close below the latter likely signaling lower lows.

The Dow dropped 0.5% after falling to a late session low of 25,934. The close below the 26,000 level keeps risk open to 25,800-25,600.

Utilities was the only sector to finish in the green after rising 0.1%.

Materials paced sector weakness with a 1.2% loss. Industrials and Financials were lower by 0.8%.

Global Economy – European markets were weak ahead of Friday’s key Brexit meeting between the EU’s negotiator Michel Barnier and the UK’s Secretary Dominic Raab.

The potential for a no-deal Brexit have eased this week after comments made by Barnier to avoid a disorderly departure from the EU by the U.K., without an agreement on future trade relations.

The Belgium20 tanked 0.9% and UK’s FTSE 100 sank 0.6%. Germany’s DAX 30 was off 0.5% and France’s CAC 40 was lower by 0.4%. The Stoxx 600 Europe fell 0.3%

Eurozone August economic confidence dipped 0.5 to 111.6, weaker than expectations for a print of 111.9.

The August business climate indicator slipped 0.08 to 1.22, below forecasts of 1.26.

The German August unemployment change declined 8,000 to 2.33 million, matching forecasts. The August unemployment rate remained unchanged at a record low of 5.2%7, also matching recasts.

Asian markets were mostly high lower after China’s Ministry of Commerce urged the U.S. to back away from imposing new tariffs on $200 billion of Chinese goods, which the U.S. said may happen on Sep 6th.

China’s Shanghai tumbled 1.1% and Hong Kong’s Hang Seng stumbled 0.9%.

South Korea’s Kospi gave back 0.1% and Australia’s S&P/ASX 200 was off 0.01%. Japan’s Nikkei climbed 0.1%.

Japan July retail sales were up 0.1%, below expectations of 0.2%.

Initial Jobless Claims rose 3,000 to 213,000 in the week ending August 25th, matching expectations. The 4-week moving average fell to 212,250 from 213,750.

Continuing claims dropped 20,000 to 1,708,000 in the August 18th week.

Personal Income and Outlays edged up 0.3% in July, with spending 0.4% higher, both as expected.

Atanta Fed’s Q3 GDPNow estimate was cut to 4.1% from 4.6% previously, bit still well above the 3.1% Blue Chip consensus.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) traded higher throughout the session while reaching a peak of $121.46.

Upper resistance at $121-$121.50 held.

A close above the latter gets earlier month hurdles at $122-$122.50 in play. Rising support is at $121-$120.50 and the 50-day moving average.

Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) snapped a 4-session winning streak following the pullback to $259.45.

Fresh and lower support at $260-$259.50 held. A close below $259.25 and the low from the gap higher 5 sessions ago could lead to a further backtest towards the $258-$257.50 area.

Resistance is at $261.25-$261.75 with continued closes above $262 being a more bullish development. The all-time January peak reached $265.93.

RSI is back in a slight downtrend with support at 60. A move below this level could signal additional weakness towards 55-50.

November 2017 resistance is at 70 and also represents late January support.

Continued closes back above this level would be a very bullish signal for a possible run towards 75-80.

The Spiders S&P Homebuilders ETF (XHB) was down for the 3rd-straight session after testing a low of $39.89. Upper support at $40-$39.75 and the 50-day moving average was breached.

A close below the latter would be a continued bearish development. Near-term and lowered resistance is at $40.25-$40.50.

RSI is approaching support at 50.

A move below this level would be a cautious signal for a retest to 45-40. Resistance is at 55-60 with the latter representing this month’s peaks.

Existing Position Update

AMZN still moving higher. I’m expecting the frenzy to reverse temporarily.

TLT is flat with minimal movement.

MU remains overbought and I’m expecting price to move into negative territory. Especially with the long term trend remaining bearish.

DAL is starting to see two sided trading action.

Let’s see how the positions do next few days.

Roger Scott