U.S. markets were sluggish to start the week after trading in tight ranges and on both sides of the ledger while settling slightly lower for the session.
The cautious action comes ahead of a week full of potentially market-moving events, including the FOMC meeting midweek, an overseas ECB meeting and the UK election.
Also looming is the December 15th deadline for additional U.S. tariffs on Chinese goods along with a possible USMCA deal.
Meanwhile, volatility was slightly elevated as the spike towards near-term resistance levels is signaling continued nervousness in the market over the near-term.
The Dow declined 0.4% after trading to a late day low of 27,906.
Prior and upper support at 28,000-27,800 was breached and failed to hold with a close below the latter signaling additional risk towards 27,600-27,400.
The Nasdaq was also off 0.4% following the pullback to 8,619 while trading in a 59-point range.
New and upper support at 8,650-8,600 was breached and failed to hold with a close below the former getting 8,500-8,450 back in focus.
The S&P 500 fell 0.3% after closing on the session low of 3,135 and trading in a 13-point range.
Near-term and upper support at 3,125-3,100 easily held with a move below the latter being a renewed bearish signal with downside potential towards 3,075-3,050 and the 50-day moving average.
The Russell 2000 also dropped 0.3% and closed on its session low of 1,629.
Current and upper support at 1,630-1,615 was breached and failed to hold with a close below the latter signaling a further backtest towards the 1,600 level.
Consumer Discretionary, Consumer Staples and Real Estate were the only sectors that showed strength after rising 0.1%. Healthcare was the leading sector laggard after falling 0.7% while Technology was lower by 0.5%.
Global Economy – European markets settled mostly lower ahead of a pivotal week for UK voters who will be heading to the polls on Thursday. Over the weekend, Prime Minister Boris Johnson, who leads in the polls, pledged to reduce immigration in a transformative Brexit.
France’s CAC 40 gave back 0.6% and Germany’s DAX 30 lost 0.5%. The Stoxx 600 and UK’s FTSE 100 were lower by 0.2% and 0.1%, respectively.
The Belgium20 bucked the trend after rising 0.3%.
Germany exports increased by 1.2% in October, versus 1.5% in September, and have increased in 7 of the past 10 months. Imports remained unchanged in October, with the adjusted trade balance widening to 21.5 billion euros, up from 21.2 billion euros in September.
Asian markets closed mostly higher despite news China’s exports in November shrank for the 4th consecutive month.
South Korea’s Kospi, Australia’s S&P/ASX 200 and Japan’s Nikkei added 0.3%. China’s Shanghai nudged up 0.1% while Hong Kong’s Hang Seng slipped 3 points, or 0.01%.
China’s exports fell 1.1% from a year earlier in November, versus forecasts for a rise of 0.8%. Exports to the US were down 23%, the worst such result since February and the 12th-straight monthly decline.
Meanwhile, Chinese imports unexpectedly rose 0.3% from a year earlier, marking the first year-on-year growth since April, and well above forecasts for a decline of 1.8%.
November TD Ameritrade IMX Level checked in at 5.17.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) snapped a 3-session slide after trading to a high of $139.11 shortly after the open.
Near-term and lower resistance at $139-$139.50 was challenged but held. A close above the latter and the 50-day moving average would be a more bullish signal for a possible push towards $140.50-$141.
Current support is trying to move up to $138.50-$138. A close below the $137.50 level would be a renewed bearish signal with additional weakness towards $136.50-$136.
Market Analysis – The Wilshire 5000 Composite Index ($WLSH) had its 3-session winning streak snapped after testing an intraday low intraday of 31,945. Current and upper support at 32,000-31,800 was breached and failed to hold.
A close below the former would signal additional weakness towards 31,600-31,400.
Current resistance is at 32,100-32,300 with the recent all-time high at 32,171.
RSI is back in a downtrend after failing lower resistance at 65-70. A close above the latter would signal additional strength towards 75 and the late November high.
Support at 60 held on the late day weakness with additional risk towards 55-50 on a close below this level.
The Technology Select Sector Spiders (XLK) fell for the first time in 4 sessions after closing on the session low of $87.30. Current and upper support at $87.50-$87 was breached and failed to hold.
A close below the former would signal another near-term top with additional risk towards $86-$85.50.
Current resistance is at $88-$88.50 with the recent all-time high at $88.42.
A close above the latter would be a renewed bullish signal with upside potential towards $89.50-$90.
RSI is back in a slight downtrend after falling below key support at 60.
Continued closes below this level would signal additional weakness towards 55-50 with the latter representing the monthly low. Resistance is at 65-70.
All the best,
Roger Scott.