U.S. markets showed weakness for the first time in 5 sessions as economic new here at home and data out of China dampened enthusiasm. The ongoing government shutdown, now entering its 33rd day, was also a drag as prospects for a resolution remain bleak.
Earnings had an impact on the Dow and will play a key role the rest of the week as announcements pick up.
Meanwhile, world financial leaders are meeting in Davos, Switzerland for its annual conference and are also giving cautious talking points on the global outlook.
The Nasdaq sank 1.9% following the late day backtest to 6,979.
Fresh and upper support at 7000-6,950 was split but held with a move below 6,975 and the 50-day moving average being a slightly bearish signal.
The Russell 2000 tanked 1.7% after testing an intraday low of 1,451.
Upper support at 1,450-1,440 and the 50-day moving average held with a move below the latter opening up risk towards 1,425-1,420.
The S&P 500 was lower by 1.4% following the second half pullback to 2,617.
Near-term and upper support at 2,625-2,600 and the 50-day moving average was breached but held with a close below the latter being a bearish development.
The Dow dropped 1.2% after trading down to 24,244 ahead of the closing bell.
Fresh and upper support at 24,300-24,100 and the 50-day moving average was tripped but held with a move below 24,000 signaling additional weakness towards 23,800-23,600.
Utilities were the only sector to show strength after adding 0.2%.
Energy led sector weakness with a decline of 2.2%.
Industrials and Communication Services fell 2.1%.
Global Economy – European markets were lower across the board after the International Monetary Fund cut its global economic growth outlook for the 2nd time in 3 months.
UK’s FTSE 100 sank 1% and the Belgium20 was lower by 0.5%. The Stoxx 600 Europe, France’s CAC 40 and Germany’s DAX 30 were down 0.4%.
The IMF said it now projects a 3.5% growth rate worldwide for 2019 and 3.6% for 2020, representing a 0.2% and 0.1% cut from its last forecast in October.
Asian markets closed with red arrows on news China’s economy weakened to its slowest pace in nearly 3 decades.
China’s Shanghai tumbled 1.2% and Hong Kong’s Hang Seng lost 0.7%.
Australia’s S&P/ASX 200 and Japan’s Nikkei gave back 0.5% while South Korea’s Kospi was off 0.3%.
China reported its economy expanded by 6.6% over a year earlier, down from 2017’s 6.9%.
Growth in the three months ending in December cooled to 6.4% from the previous quarter’s 6.5%.
Existing Home Sales declined 6.4% to 4.99 million in December, missing forecasts for a rise of 0.6% to a 5.35 million unit rate.
Single family sales for December dropped 5.5% to 4.45 million after November’s 1.9% jump to 4.71 million.
Condo/coop sales tumbled 12.9% to 540,000 following a 3.3% November gain to 620,000.
Sales declined in all four regions, with the Midwest sliding 11.2%. The months’ supply of homes for sale fell to 3.7 million from 3.9 million.
The median sales price dipped to $253,600 from $257,300, and is up 2.9% year-over-year, but represents the slowest pace of appreciation since February 2012.
The record high was reached last June at $273,800.
Market Sentiment – Fedspeak for the remainder of the month has mainly ended as the blackout period approaches ahead of the January 29th-30th FOMC meeting.
There will be a scheduled press conference at each meeting, but the market isn’t pricing another tightening any time soon, with the belief the Fed is on pause, for now.
The iShares 20+ Year Treasury Bond ETF (TLT) closed higher for the 3rd time in 4 sessions after tapping an intraday high of $120.72.
Near-term and lower resistance at $120.50-$121 was cleared but failed to hold with continued closes above the latter being a slightly bullish signal.
Current support is at $120-$119.50 with risk towards $119-$118.50 on a move below the latter.
Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) had its 4-session winning streak snapped following the pullback to $242.35. Upper support at $242.50-$242 was tripped but held.
A close below the latter and the 50-day moving average would setup a possible retest to the $240 level.
Lowered resistance is at $244.50-$245. A move back above the latter sets up another run towards $247-$247.50 and the 200-day moving average.
RSI is back in a downtrend with support at 55-50.
A move below the latter would be a slightly bearish signal with weakness towards 45-40 and prior support from late December. Resistance is at 60.
The Consumer Staples Select Spiders (XLP) had its 2-session winning streak snapped after bottoming at $51.55. Fresh and upper support at $52-$51.50 and the 200-day moving average was breached and failed to hold.
A close back below the latter would be a bearish signal for continued weakness towards $50.50-$50.
Lowered resistance is at $52.50-$52.75. Continued closes above $53 would signal a return of momentum.
RSI is in an downtrend with support at 50.
A close below this level could lead to continued weakness towards 45-40 and early January support levels. Resistance is at 55.
All the best,
Roger Scott.