U.S. markets showed continued weakness on Monday as a rise in the U.S. dollar and lingering worries about global trade weighed on sentiment.

Oil price concerns also played a role after Saudi Arabia said it would cut its oil production, while the Organization of the Petroleum Exporting Countries said it is also considering a more sweeping reduction of output.

The major indexes hit their lows late in the day on reports the White House was circulating a draft report on auto tariffs. Volatility spiked 17% while closing back above a key level of resistance.

The Nasdaq plunged 2.8% after trading to an intraday low of 7,193.

Fresh and late October support at 7,200-7,150 held with the index giving back its gains for the month.

The S&P 500 sank 2% with the low reaching 2,722 on the close back below the 200-day moving average. Upper support at 2,725-2,700 held by a point with risk to 2,650-2,600 on a close below the latter.

The Dow tanked 2.3% following the pullback to 25,340 while closing back below its 50-day moving average.

Fresh and upper support at 25,400-25,200 failed to hold into the close with a move below the latter being a continued bearish signal.

The Russell 2000 fell 2% after tapping a session low of 1,518. Lower support at 1,525-1,520 was breached and keeps further risk towards 1,500-1,490 in play.

Real Estate gained 0.2% and was the only sector that showed strength.

Technology easily paced sector weakness after plummeting 3.5%.

Energy was off 2.2% while Financials, Consumer Discretionary and Industrials were down 2.1%, respectively.

Global Economy – European markets were lower across the board as Italy’s budget impasse with the EU shows no signs of being resolved.

Italy’s Deputy Prime Minsker, Di Maio, said respecting EU budget limits is suicidal and would bring on a recession.

Germany’s DAX 30 dropped 1.8% and the Stoxx 600 Europe fell 1%. France’s CAC 40 and the Belgium20 were down 0.9% while UK’s FTSE 100 gave back 0.7%.

Asian markets were higher on the prospects for looser monetary policy after the Peoples Bank of China said the global outlook is worsening and it would preemptively adjust and fine-tine policies according to changing conditions.

China’s Shanghai jumped 1.2% and Australia’s S&P/ASX 200 added 0.3%.

Hong Kong’s Hang Seng, Japan’s Nikkei, and South Korea’s Kospi edged up 0.1%.

Japan October PPI rose 0.3% month-over-month and 2.9% year-over-year, topping expectations of 0.1% and 2.8%.

Japan October machine tool orders fell 1.1% year-over-year, the first decline in nearly 2 years.

There was no major economic news today.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd-straight session after trading to an intraday high of $114.31.

Lower resistance at $114-$114.50 was cleared and held into the close.

More important hurdles are at $115-$115.50 and the 50-day moving average. Rising support is at $113.50-$113.

Market Analysis – The Russell 2000 ETF (IWM) extended its losing streak to 3-straight sessions after tapping a low of $150.84.

Fresh and upper support at $151-$150.50 held by a thread. A move below the latter would be a bearish development with risk to $148-$146.

Lowered resistance at $152.50-$153.

The 50-day moving average remains on track to fall below the 200-day moving average.

This would form a death cross if the pattern plays out and is typically a bearish development for lower lows.

RSI is in a downtrend with support at 40.

A move below this level would signal additional weakness towards 35-30. Resistance is at 45-50.

The Spiders S&P Homebuilders ETF (XHB) was down for the 3rd-straight session following the backtest to $34.18.

Upper support at $34.25-$34 failed to hold with a move below the latter being a continuing bearish signal.

Lowered resistance is at $34.75-$35. Both the 50-day and 200-day moving averages are in a downtrend.

RSI is approaching support at 40 with a close below this level signaling additional weakness.

Resistance is at 45-50 with the latter representing the monthly peak.

All the best,
Roger Scott