U.S. markets struggled throughout Monday’s action despite bond markets being closed for the Columbus Day holiday.

Wall Street was looking for a rebound and got some nice pin action in the final hour of trading but the weakness was once again being blamed on the recent rise in bond yields.

Global market were slammed and also contributed the tone along with the ongoing U.S. trade fight with China.

The mixed finished offered hints of a possible bottoming process but the VIX remains elevated after triggering another level of fresh resistance.

The Dow climbed 0.2% after erasing a 224-point deficit while reaching a peak of 26,529.

Prior resistance at 26,600-26,800 is back in play on continued closes above 26,400-26,350.

The S&P 500 slipped a point, or 0.04%, following the backtest to 2,862.

Support at 2,875-2,865 and the 50-day moving average was stretched but held with a close below 2,850 being a continuing bearish development.

The Russell 2000 dipped 0.2% after testing a 3rd-straight lower low of 1,616.

May support at 1,620-1,610 and the 200-day moving average held for the second-straight session with a close below the latter likely leading to panic selling.

The Nasdaq fell 0.7% following the intraday plunge to 7,654.

Late July and lower support at 7,700-7,650 held on a dime with a close above 7,800 signaling a possible short-term bottom.

Consumer Staples and Real Estate jumped 1.4% and 1.3% to show the most sector strength. Utilities and Financials soared 0.8% and 0.7%.

Technology and Communication Services paced sector weakness after falling 1.1% and 0.3%, respectively.

Global Economy – European markets were weak after the European Commission rejected the Italian government’s plan for a wider budget deficit.

EU officials said that the Italian government’s plan for a 2.4% budget deficit of GDP in 2019 will put them in breach of EU austerity rules.

Germany’s DAX 30 tanked 1.4%. The Belgium20 sank 1.3%. UK’s FTSE 100 dropped 1.2% while France’s CAC 40 and the Stoxx 600 Europe gave back 1.1%.

German August industrial production fell 0.3%, missing forecasts for a rise of 0.3%.

The Eurozone October Sentix investor confidence dropped 0.6 to 11.4, missing estimates of 11.6.

The PBOC lowered the reserve requirement ratio for banks by 100 basis-points to 14.5% from 15.5% effective October 15th.

Asian markets sold-off as traders in China returned to work after a weeklong holiday while Japan’s Nikkei was closed for a three-day weekend.

China’s Shanghai tumbled 3.7%.Hong Kong’s Hang Seng and Australia’s S&P/ASX 200 dove 1.4% while South Korea’s Kospi declined 0.6%.

The China September Caixin services PMI unexpectedly rose 1.6 to 53.1, topping expectations for a print of 51.4.

The TD Ameritrade IMX for September rose for a fifth consecutive month, increasing to 6.23.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) declined for a 4th-straight session after testing a low of $112.64. Upper support $112.50-$112 held with a close below the latter being a continuing bearish signal.

Lowered resistance is at $113-$113.50.

Market Analysis – The PowerShares QQQ (QQQ) fell for a 3rd-straight session following the backtest to $176.93. Mid-August and upper support at $178-$177.50 was breached but levels that held.

A close below the latter could lead to a further backtest towards $175-$174.50 and late July lows.

Resistance is at $180.50-$181 with additional hurdles at $182 and the 50-day moving average.

RSI has been in a downtrend and is trying to level out with support at 35-30 and February/ March lows. A close below the latter would represent oversold levels.

Resistance is at 40 with continued closes above this level signaling additional strength for a run towards 45-50.

The Real Estate Select Sector Spider (XLRE) closed higher for the second straight session following the run to $32.31.

Fresh resistance at $32.25-$32.50 held with a move above the latter being a continued bullish development and signaling a possible near-term bottom.

Support is at $31.75-$31.50. The latter represents early June resistance and held on last week’s fade to $31.47.

A close below this level would be a bearish development for lower lows.

RSI is trying to clear resistance at 45 after leveling out in the 35 area.

A close above this level could lead to a push toward 50 and the late September peak.
Fresh support is at 40.

All the best,
Roger Scott.