U.S. markets opened over 1% lower to start Tuesday's session as fresh headwinds from key earnings reports weighed on sentiment.

Tensions surrounding the killing of a Saudi journalist, midterm elections in the U.S. and continuing U.S.-China trade tensions also pushed the major indexes towards 6-month lows.

The turnaround off the morning borrom helped push the blue-chips into positive territory with the Dow erasing a 549-point loss.

The morning flush out could lead to another short-term rally but the technical outlook remains slightly bearish.

The Nasdaq sank 0.4% after opening at 7,328 and testing a low of 7,260.

The fresh monthly low held support at 7,250-7,200 with a move below the latter being a continued bearish signal.

The Dow dropped 0.5% while testing an intraday low of 24,768.

Backup support from early July at 25,00-24,800 held along with the close slightly above the 200-day moving average.

The S&P 500 stumbled 0.6% after kissing a morning low of 2,691.

Major support from late June at 2,725-2,700 was breached with both levels holding into the closing bell.

The Russell 2000 tumbled 0.8% following the pullback to 1,501.

Early April support at 1,500-1,490 held with a move below the latter likely leading to panic selling.

Real Estate and Consumer Staples rose 0.6% and 0.4% to lead sector strength.

Energy got whacked for 2.6% and paced sector laggards while Industrials and Materials fell 1.7% and 1%, respectively.

Global Economy - European markets were weak across the board after the European Commission rejected Italy's proposed 2019 budget, and a move that threatens to heighten a dispute between the EU and Italy's populist government over fiscal rules.

Germany's DAX 30 declined 2.2% and the Belgium20 stumbled 2.1%.

France's CAC 40 was lower by 1.7% and the Stoxx 600 Europe fell 1.6%. UK's FTSE 100 was off 1.2%.

UK October CBI trends total orders fell 5 to a 2-year low of -6, weaker than forecasts for a rise of 3 to 2.

The October CBI trends selling prices also dropped 5 to a 13-month low of 10, missing estimates for a gain of 2 to 15.

German September PPI rose 0.5% month-over-month and 3.2% year-over-year, topping expectations of 0.3% and 3%, respectively.

Asian markets closed deep in the red on lingering concerns over a Chinese economic slowdown despite the Chinese government announcing fresh measures to boost economic growth.

Hong Kong's Hang Seng plunged 3.1% and Japan's Nikkei plummeted 2.7%.

South Korea's Kospi sank 2.6% and China's Shanghai gave back 2.3%. Australia's S&P/ASX 200 declined 1.1%.

Redbook Store Sales were up 5.5% for the year in the week ending October 20th.

Richmond Fed Manufacturing Index checked in at 15, missing forecasts for a print of 24. The employment component improved 3 notches to 19, with wages at 28.

New order volume fell to 20 from 34. Prices paid climbed to a 5.68% pace versus 3.47%, with prices received at 2.84% from 1.93%. The 6-month business activity index rose to 49 from 43, with employment at 33 from 23, wages at 59 from 45.

Future price trends showed prices paid at 3.87%, up from 3.04%, and prices received at 2.66%, up from 2.37%.

U.S. chain store sales rebounded 1.9% in the week ending October 20th, recovering about two-thirds of the prior week's 3.5% drop due largely to Hurricane Michael.

The annual pace of sales dipped to a 2.7% clip versus 2.8% year-over-year previously.

Market Sentiment - Dallas Fed Robert Kaplan reiterated the FOMC should gradual reduce accommodation, while adding his forecast for neutral is in the lower half of the Fed's 2.5%-3.5% range.

He said the consumer is in good shape currently but thinks growth may slow a little in 2019 and 2020.

Kaplan went on to say GDP should be around 3% this year, with unemployment at 3.7%. He said the latter rate may continue to dip but at a slower rate.

He did note some turmoil in emerging markets, including Argentina, Turkey, and China, but said he hasn't seen any spillover weakness from emerging markets.

In closing remarks, Kaplan said the Fed will feel its way as the balance sheet unwinds and an inverted yield curve would concern him.

He said wage pressures are building but he doesn't see runaway inflation.

Atlanta Fed Raphael Bostic continues to tout a gradual path of tightening until getting to the neutral rate.

His view is that the Fed is stll a few rate hikes away, but admitted there is some uncertainty around estimates of what that level is.

He upped his forecast on GDP for 2018 and 2019, supporting his policy views.

Bostic added there is little reason to keep the foot on the gas and added the economy is doing well enough to stand on its own, and that risks are tilted to the upside.

He said tailwinds include tax reform and fiscal stimulus, while there are headwinds from trade policy and market volatility.

The iShares 20+ Year Treasury Bond ETF (TLT) traded in positive territory throughout the session while tapping a high of $115.02 with prior resistance at $114.50-$115 holding.

Support remains at $113.50-$113 on the close below $114.

Market Analysis - The Spider S&P 500 ETF (SPY) opened at $270.95 while bottoming at $268.61 shortly afterwards.

Late June support is at $268.50-$268 held. A move below $267.50 would be a continued bearish signal.

Near-term resistance is at $274.50-$275 on the close just below the 200-day moving average with a move back above $277.50 being a more bullish development.

RSI is remains in a downtrend with support at 30.

Another move below this level gets 25-20 back in play and would signal oversold levels. Resistance is at 35-40 with the latter representing the mid-month peak.

The Energy Select Sector Spider (XLE) plunged to a morning low of $67.91 with major support at $68 holding. This level also represents February, March and early April resistance.

A close below $67.75 could lead to additional selling pressure towards the $66-$65 area.

Near-term resistance is at $69.50-$69.75.

Continued closes back above $70 would be a slightly bullish development and signal a possible short-term bottom.

RSI is oversold and remains in a downtrend with August 2015 support at 20. Resistance at 25-30.

All the best,
Roger Scott.