U.S. markets showed weakness for a 2nd-straight session while settling mostly lower to begin the week. Tensions with Iran remain elevated following fresh sanctions, while the G20 summit looms at the end of the week.

China trade relations also remain a big focus after Chinese vice commerce minister Wang Shouwen said China would like the U.S. to cancel inappropriate actions against its technology companies.

Volatility stayed slightly elevated while closing slightly lower but remains in no man’s land.

The Russell 2000 led the losses for the 2nd-straight session after sinking 1.1% and closing just off its session low of 1,531. Lower support at 1,550-1,535 was breached and failed to hold with the close below the 200-day moving average being a slightly bearish signal.

The Nasdaq gave back 0.3% following the late day backtest to 8,004.

Current and upper support at 8,000-7,950 held for the 3rd-straight session with a move below the latter getting 7,900-7,850 and the 50-day moving average back in focus.

The S&P 500 was lower by 0.2% after trading to a low of 2,944 ahead of the closing bell.

Near-term and upper support at 2,950-2,925 failed to hold with a move below the latter signaling additional weakness towards 2,900-2,875 and the 50-day moving average.

The Dow gained 8 points, or 0.03% with the morning peak reaching 26,806. Near-term and lower resistance at 26,800-27,000 was tripped but held with the all-time high at 26,951.

Materials led sector strength after advancing 0.4% while Consumer Staples rose 0.3%.

Energy was the weakest sector after falling 0.9% with Healthcare, Real Estate and Consumer Discretionary declining 0.5%.

In the June monetary policy meeting minutes, the Reserve Bank of Australia said it was more likely than not that further easing would be appropriate, following a decision to lower the cash rate by 25 basis points to 1.25%.

Chicago Fed National Activity Index for May rose 0.43 points to -0.05 after falling 0.5 points to -0.48 in April. The 3-month moving average improved to -0.17 from April’s -0.37.

Dallas Fed Manufacturing Survey fell another 6.8 points to -12.1 in June, well below expectations of -1, after falling 7.3 points to -5.3 in May. This represented the lowest level since the -17.1 print in June 2016.

On the plus side, production rose to 8.9 from 6.3. However, the company outlook dropped to -5.5 from -1.7 while employment gauge slid to 8.8 from 11.6, with the workweek sliding to 4.7 from 6.4.

Wages dropped to 22.7 from 27.6 while new orders inched up to 3.7 from 2.4.

Prices paid jumped to 16.4 from 7.4, with the prices received at 1.2 from 0.7.

The 6-month outlook declined to -2.7 from 9.1, with employment at 20.2 from 28.9, wages at 39.6 from 32.8, and capex little changed at 22.5 from 22.8.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) rebounded to close higher for the 9th time in 10 sessions after tapping an intraday peak of $132.53. Prior and lower resistance at $132.50-$133 was breached but held with the recent 52-week peak at $133.51.

Current support is at $132-$131.50 with backup help at $130.50-$130.

Market Analysis – The Invesco QQQ Trust (QQQ) was up for the 5th time in y sessions despite the intraday pullback to $188.06. Current and upper support at $188-$187.50 held.

A move below the latter would be a slightly bearish signal for a further backtest towards $185.50-$185.

Resistance from late April is at $189.50-$190.

Continued closes above the latter and the all-time high of $191.32 would signal a return of momentum with upside potential towards $192-$192.50.

RSI has leveled out with resistance at 70 and the high from early May. Continued closes above this level would signal additional strength towards 75-80 and April peaks.

Support is at 60-55 with a close below the latter signaling additional weakness.

The Consumer Discretionary Select Spiders (XLY) extended its losing streak to 2-straight sessions after trading to an intraday low of $118.84. Upper support at $119-$118.50 was breached and failed to hold.

A close below the latter opens up risk towards the $117.50 level.

Current resistance is at $119.50-$120.

Continued closes above the latter and the April all-time high of $120.90 would be a renewed bullish signal with blue-sky territory towards $122-$122.50.

RSI is in a downtrend with support at 60.

A close below this level opens up risk towards 55-50 with the latter representing the breakout level from earlier this month and prior resistance from mid-May.

Current resistance is at 65-70 and the latter representing the peak from last week.

Volatility Index – The S&P 500 Volatility Index ($VIX) traded in a quarter-point range with the session high reaching 15.56. Lower resistance at 15.50-16 was breached but held.

Support remains at 14.50-14 with the close back below the 50-day moving average being a slightly bullish signal.

We are allocating the portfolio as follows:

60% in ZIV closed on Monday at 72.88
40% in EDV closed on Monday at 126.50

All the best,
Roger Scott.