U.S. markets showed continued selling pressure on Thursday’s open before rebounding shortly afterwards and testing positive territory.

However, sellers emerged in the second hour of trading and another selloff resumed.

The major indexes are suffering through their worst week since March with at least 65% of the S&P 500 now in correction territory or worse.

Volatility reached its highest level in 8 months with Tech and the small-caps entering correction territory.

The Russell 2000 extended its losing streak to 6-straight sessions after giving back 1.9% and closing at a session low of 1,545. May and upper support at 1,550-1,540 was breached with a move below the latter signaling additional weakness.

The Dow dropped 2.1% following the intraday backtest of 24,899.

Fresh and upper support at 25,000-24,800 was split with a move below the latter being a continued bearish development.

The S&P 500 also sank 2.1% after testing a second half low 2,710.

July support at 2,725-2,700 is back in play with a close below the latter signaling lower lows.

The Nasdaq fell 1.3% following the intraday pullback to 7,274. Fresh and May support at 7,300-7,250 held with risk to 7,200-7,000 on continued selling pressure.

For the 2nd-straight session there was no sector strength.

Energy was the weakest sector after falling 3.4% while Financials and Real Estate were off 2.9%. Health Care dropped 2.7%

Global Economy – European markets showed continued weakness with Italy’s MIB stock market index down nearly 20% from its April high.

This would put the index in a bear market if and when the double-digit loss is tripped.

The Belgium20 and the Stoxx 600 Europe were down 2% while France’s CAC 40 and UK’s FTSE 100 fell 1.9%. Germany’s DAX 30 declined 1.5%.

ECB Governing Council member Hansson said Eurozone wage growth is finally accelerating.

He added a shortage of equipment is placing constraints on companies’ production, and these trends should spill over eventually into core inflation.

Asian markets were hit hard amid a backdrop of plunging global markets.

China’s Shanghai plummeted 5.2% and South Korea’s Kospi sank 4.4%.

Japan’s Nikkei tumbled 3.9% while Hong Kong’s Hang Seng’s tanked 3.5%. Australia’s S&P/ASX 200 stumbled 2.7%.

Japan September PPI rose 0.3% month-over-month and 3% year-over-year, topping expectations of 0.2% and 2.9%.

Jobless Claims rebounded 7,000 to 214,000, above estimates for a print of 207,000.

The 4-week moving average was at 209,000 versus 207,000.

Continuing Claims climbed 4,000 to 1,660,000 after sliding 7,000 to 1,656,000 previously.

Consumer Price Index rose 0.1% in September, with the core rate up 0.1%, as well with both missing forecasts for a rise of 0.2%.

Market Sentiment – Kansas City Fed George said further, gradual, rate hikes are needed, the pace and extent of which are a key part of Fed deliberations.

She sees the risks to the economy as balanced, though inflation could rise over the next couple of years.

President Trump accused the Fed of getting a little too cute by tightening policy and undoing all his good works by being too aggressive and making a big mistake. Trump added that the Fed is going “loco” and there is no reason for them to do it.

He had mentioned the Fed had gone crazy, twice, in earlier comments.

In follow up comments, he said he is not going to fire Fed Chairman Powell and that he is just disappointed in his Fed chief.

Trump repeated he believes the Fed is making a mistake and is far too stringent, adding Wednesday’s market correction was caused by the Fed. Yikes.

The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd time in 3 sessions after testing a high of $115.15.

Fresh and lower resistance at $115-$115.50 held into hr close with a move back above $116 being a more bullish development.

Rising support is at $114.25-$113.75 with a close below $113.50 signaling a possible return of lower lows.

Market Analysis – The Spider Small-Cap 600 ETF (SLY) extended its losing streak to 6-straight sessions following Thursday’s backtest to $68.72 and session low.

Early May support at $68.50-$68 held with a close below the latter likely signaling additional weakness.

Lowered resistance at $69.50-$70 followed by $70.50-$71 and the 200-day moving average.

Continued closes above the latter would be a more bullish development and signal a possible bottoming process.

RSI from January 2016 and August 2015 levels are in play with lower support at 18-15 holding and indicating oversold territory.

Resistance is at 20-25 with a close above the latter signaling additional strength.

The Consumer Staples Select Spiders (XLP) plunged to a low of $51.92 with upper July support at $52.25-$51.75 getting breached.

A close below the latter would be a slightly bearish signal for lower lows.

Lowered resistance is at $52.50-$53 following the close below the 200-day moving average.

RSI remains in a downtrend with May support at 30.

A close below this level will likely signaling additional weakness with risk to 25 area and the March lows. Resistance is at 35-40.

All the best,
Roger Scott.