U.S. markets showed continued weakness on Thursday despite signs the job market remains strong as rhetoric on both sides of the China/ U.S. trade fight heated up and remained the focal point.
Treasury Secretary Mnuchin said that proposed tariffs on a further $300 billion worth of Chinese imports could be a month away once the impact on U.S. consumers had been studied.
Meanwhile, China’s Commerce Ministry reportedly said that the U.S. needs to correct its wrong actions if it wants to continue negotiations. Volatility jumped 14% while holder prior resistance levels from earlier this month.
The Russell 2000 tanked 2% after tapping an afternoon low of 1,593.
Major upper support from February, March and earlier this month at 1,500-1,485 was breached and failed to hold with risk towards 1,475-1,460 on a close below the latter.
The Nasdaq plummeted 1.6% following the intraday backtest to 7,585.
Prior support from March and earlier this month at 7,600 was breached but held with a close below the latter opening up risk towards 7,550-7,500 and the 200-day moving average.
The S&P 500 sank 1.2% with the late session low tapping 2,805.
Prior and major support from last week and late March at 2,800 held with a close below below this level getting 2,775-2,750 and the 200-day moving average back in play.
The Dow also dropped 1.1%, after trading to a midday low of 25,328.
Prior and upper support from late March at 25,500-25,250 was breached and failed to hold with a close below the latter and the 200-day moving average being an ongoing bearish development.
Utilities and Real Estate were the only sectors that showed strength after rising 0.9% and 0.5%, respectively.
Energy was the weakest sector for the 2nd-straight session after stumbling 3.4%.
Technology tumbled 1.7% while Financials, Industrials and Materials dropped 1.5%.
Global Economy – European markets finished lower following calls for Prime Minister Theresa May to step down as her new Brexit deal is widely expected to be rejected by the UK’s Parliament.
France’s CAC 40 and Germany’s DAX 30 gave back 1.8%. UK’s FTSE 100 and the Stoxx 600 Europe declined 1.4% while the Belgium20 slipped 1.3%.
Eurozone manufacturing flash PMI for May came in at 47.7, missing estimates of 48.1, and down from 47.9 in April. The services flash in Europe also missed, dropping to 52.5 from 52.8 in April.
German business confidence fell to a four-year low after the Ifo Institute’s business climate indicator in May fell to 97.9, below expectations of 99.2 and the previous month’s print.
Much of the decline was down to a fall in assessment of current conditions, which fell to 100 from 103.4 the previous month. Business expectations stayed steady on the month at 95.3.
Asian markets closed lower across the board.
Hong Kong’s Hang Seng tanked 1.6% and China’s Shanghai declined 1.4%.
Japan’s Nikkei pulled back 0.6% while Australia’s S&P/ASX 200 and South Korea’s Kospi were lower by 0.3%
Jobless Claims slipped 1,000 to 211,000 versus expectations for a print of 215,000, and the lowest level since late 1969. The 4-week moving average moved down to 220,250 from 225,000. Continuing claims rose 12,000 to 1,676,000 after falling 22,000 to 1,664,000.
PMI Composite Flash fell to 50.6 in May versus 52.6 in April, missing forecasts of 52.2 and representing the worst level since September 2009.
New orders dropped into contraction at 49.7 versus 53.5. The services index slid to 50.9 from 53, the weakest since February 2016. Prices charged declined versus April while the composite also dropped to 50.9 from the prior 53
New Home Sales sank 6.9% to 673,000 in April after surging 8.1% to 723,000 in March. Regionally, sales fell 8.3% in the West to 188,000 and were down 7.4% in the Midwest to 87,000.
The South slumped 7.3% to 369,000 while sales grew 11.5% to 29,000 in the Northeast.
The months’ supply of homes rose to 5.9 from 5.6. The median sales price rose 11.9% to $342,200 after falling 3.3% to $305,800 the prior month.
Kansas City Fed Manufacturing Index for May came in at 4 versus forecasts for a print of 6.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) surged to a fresh 52-week peak of $128.09. Fresh and lower resistance from January 2016 at $128-$128.50 was cleared but held.
A close above the latter gets upside potential towards $129.50-$130 in play.
Rising support is at $127-$126.50.
Market Analysis – The Invesco QQQ Trust (QQQ) fell for the 4th time in 5 sessions following the intraday pullback to $177.14. Near-term and upper support from late March at $177.50-$177 was breached but held.
A close below the latter would be a continuing bearish signal with additional weakness towards $174-$173.50 and the 200-day moving average.
Current and lowered resistance is at $178.50-$179.
A close back above the $180 level would be a more bullish signal near-term selling pressure has abated.
RSI is in a downtrend with support at 35-30 and the latter representing the month low.
A move below 30 would signal additional weakness towards 25 and the December low while also signaling oversold levels. Resistance is at 40.
The Real Estate Select Sector Spider (XLRE) was up for the 3rd-straight session following the 2nd half run to $36.74. Prior and lower resistance from mid-Month at $36.50-$36.75 was cleared and held.
Continued closes above the latter could lead towards a run to $37-$37.25 with the current and 52-week peak from last week at $36.84.
Rising support is at $36.50-$36.25.
A close back below $36 and the 50-day moving average would be a slightly bearish development and signal a possible near-term top.
RSI is in an uptrend with resistance at 60.
A move above this level would signal additional strength towards 65-70 and mid-April highs.
Support is at 55-50 with a close below the latter being a bearish development for additional weakness.
Initiated APPLE bull put, waiting to fill on the call side.
Expect to see consolidation next few sessions.
Volatility should decline before picking up again.
Want to give few positions few more days before liquidating.
Will update you tomorrow as usual.