U.S. markets showed strength on Wednesday’s open before turning south afterwards and showing weakness for the 5-straight session.

The rebound off the lows was slightly encouraging but October lows remain in play.

A death-cross has officially formed in the small-caps for the first time in 2 1/2 years and remains a concern. Meanwhile, volatility spiked to its highest level of the month but held key levels of resistance.

The Nasdaq was down 0.9% after testing an intraday low of 7,101.

Late October support at 7,100-7,050 held with a close 7,000 likely leading to additional selling pressure.

The S&P 500 was lower by 0.8% following the pullback to 2,685. Upper support at 2,700-2,675 held with risk to 2,625-2,600 and October lows on a close below the latter.

The Dow declined 0.8% after trading to an intraday low of 24,935.

Fresh and upper support at 25,000-24,800 held but the close below the 200-day moving average was a slightly bearish development.

The Russell 2000 also fell 0.8% after tapping a session low of 1,494. Upper support at 1,500-1,490 was breached with a close below the latter likely getting 1,480-1,460 in play.

Communication Services gained 0.5% and was the only sector that closed in positive territory.

Financials tanked 1.4% and Technology was down 1.2% to lead sector weakness.

Utilities fell 1% while Healthcare and Consumer Discretionary stumbled 0.8%.

Global Economy – European markets closed lower despite a key breakthrough between Britain and the EU on a possible Brexit deal.

Prime Minister May asked her divided Cabinet ministers to back her Brexit deal or quit.

France’s CAC 40 was off 0.7% and the Stoxx 600 Europe fell 0.6%.

Germany’s DAX 30 dropped 0.5% while UK’s FTSE 100 and the Belgium20 gave back 0.3%.

Eurozone Q3 GDP was left unrevised at 0.2% quarter-over-quarter and 1.7% year-over-year.

Eurozone September industrial production slipped 0.3% month-over-month and was up 0.9% year-over-year, topping forecasts for a decline of 0.4% and a gain of 0.3%, respectively.

German Q3 GDP dipped 0.2% for the quarter but was up 1.1% year-over-year, weaker than estimates for a dip of 0.1% and 1.2%.

UK October CPI rose 0.1% month-over-month and 2.4% year-over-year, below expectations of 0.2% and 2.5%, respectively.

October core CPI rose 1.9% year-over-year, matching expectations.

Asian markets settled mostly lower on weaker-than-expected economic news out of Japan and China.

Australia’s S&P/ASX 200 sank 1.7% and China’s Shanghai gave back 0.9%.

Hong Kong’s Hang Seng fell 0.5% and South Korea’s Kospi was lower by 0.3%. Japan’s Nikkei climbed 0.1%.

Japan Q3 GDP fell 1.2%, missing forecasts for a drop of 1%. The Q3 GDP deflator fell 0.3% year-over-year, weaker than expectations for a dip of 0.1%.

China October industrial production rose 5.9%, topping estimates of 5.8% year-over-year.

China October retail sales were up 8.6%, missing forecasts of 9.2%.

U.S. Economy

MBA Mortgage Applications were down 3.2%, along with a 2.3% drop in the purchase index, and a 4.3% decline in the refinancing index for the week November 9th.

The average 30-year fixed rate increased 2 basis points to 5.17%.

October Consumer Price Index rose 0.3% in October with the core rate up 0.2%, matching forecasts.

The 12-month pace for total CPI was 2.5% year-over-year in October, up from 2.3% in September while the core slowed to a 2.1% year-over-year rate from 2.2%.

Real average hourly earnings grew at a 0.7% year-over-year pace versus September’s 0.5% rate of increase.

November Atlantic Fed Business Inflation Expectations were up 2.2% year-over-year.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) pushed a fresh weekly high of $114.52 with lower resistance at $114.50-$115 and the 50-day moving average holding.

Continued closes above the latter would be a slightly bullish signal.

Near-term support remains at $113.50-$113 with a move below the latter being a slightly bearish signal.

Market Analysis – The Spider Small-Cap 600 ETF (SLY) fell for the 5th-straight session after showing early morning strength and making a run to $68.56.

Lower resistance at $68.50-$69 held before the fade to $67.11.

Near-term support is at $67-$66.75 with a close below the latter likely signaling continued selling pressure.

The 50-day moving average remains on track to fall below the 200-day moving average and would form a death cross if complete.

This is typically a bearish technical setup for lower lows.

RSI is pushing support at 35-30.

A close below the latter would likely get October lows in the 20’s back in play. Resistance is at 40.

The Spider S&P Retail ETF (XRT) extended its losing streak to 4-straight sessions despite testing a session high of $49.12 shortly after the open.

Resistance at $49-$49.25 and the 50-day moving average held with continued closes above the latter being a more bullish development.

The backtest to $47.28 and close back below the 200-day moving average was a slightly bearish development.

Fresh support is at $47.25-$47 with a close below the latter signaling additional weakness.

RSI is in a downtrend with support 40. A move below this level opens up risk towards 35-30. Resistance is at 45-50.

All the best,
Roger Scott.