U.S. markets showed strength for the majority of the session with some late day selling pressure resulting in a mixed finish.

A report that White House trade advisor Peter Navarro would not be attending a Trump-Xi meeting helped fuel the rebound following 2 days of heavy selling pressure.

The news could be interpreted as a more hopeful omen on the trade front ahead of the G20 meetings in a couple of weeks.

However, volatility remains slightly elevated after near-term support levels held ahead of Thursday’s holiday and Friday’s shortened session.

The Russell 2000 rallied 1.3% after trading to an intraday high of 1,499.

Fresh resistance at 1,490-1,500 held with continued closes above the latter signaling a possible near-term bottom.

The Nasdaq rose 0.9% with the morning peak tapping 7,029.

Resistance at 7,000-7,050 was split with both levels holding into the closing bell.

The S&P 500 was higher by 0.3% following the intraday push to 2,670.

Prior resistance at 2,675-2,700 held with the close below 2,650 being a slightly bearish signal for Friday.

The Dow dipped a point, or 0.0%, despite testing a session high of 24,669.

Lower resistance at 24,600-24,800 was breached but a level that held into the closing bell.

Energy led sector strength after rising 1.6%. Communication Services and Consumer Discretionary were up 1.2% and 1.1%, respectively.

Utilities paced sector laggards after sinking 1.5% while Consumer Staples fell 0.8%.

Global Economy – European markets closed higher across the board on news that Italy may be open to reviewing its draft budget for 2019, potentially easing a confrontation with the European Union.

Germany’s DAX 30 jumped 1.6% and UK’s FTSE 100 surged 1.5%.

The Belgium20 rallied 1.2% while the Stoxx 600 Europe was up 1.1%. France’s CAC 40 soared 1%.

UK October public sector net borrowing checked in at 8 billion pounds, topping estimates of 5.6 billion pounds.

Asian markets were mixed with Japan’s Nikkei down 0.4% and at a 3-week low. Hong Kong’s Hang Seng added 0.5% and China’s Shanghai was up 0.2%.

South Korea’s Kospi and Australia’s S&P/ASX 200 gave back 0.5%.

The Japan September all-industry activity index fell 0.9%, matching expectations.

MBA Mortgage Applications slipped 0.1%, along with a 3.1% increase in the purchase index and a 5% drop in the refinancing index.

The 30-year fixed mortgage rate fell 1 basis point to 5.16%.

Durable Goods Orders sank 4.4% in October, much weaker than expectations for a drop of 2.5%.

Transportation orders fell 12.2% and were a major contributor versus the prior 0.9% increase. Excluding transportation, orders edged up 0.1% after sliding 0.6% last month.

Nondefense capital goods orders excluding aircraft were flat after falling 0.5% previously. Shipments declined 0.6% following September’s 1% rise.

Nondefense capital goods shipments ex-aircraft were up 0.3% from -0.2%. Inventories were unchanged after rising 0.8% last month while the inventory-shipment ratio was steady at 1.61.

Jobless Claims rose 3,000 to 224,000, topping estimates for a print of 215,000. The 4-week moving average increased to 218,500 from 216,500. Continuing claims dipped 2,000 to 1,668,000.

Consumer Sentiment was at 97.5, below estimates of 98.3. The expectations index slipped to 88.1 in November from 89.3 in October. The 12-month inflation index slowed fractionally to 2.8% versus 2.9% last month.

The 5-year price gauge rose to 2.6% from 2.4%.

October Existing Home Sales came in at 5,220,000, just ahead of forecasts for 5,210,000. Single family home sales rebounded 0.9% to 4,620,000 after contracting 3.4% to 4,580,000 in September.

Condo/coop sales climbed 5.3% to 600,000 versus the 3.4% fall to 570,000 last month.

Regionally, sales were 2.8% higher in the West and were up 1.9% in the South. The Northeast was up 1.5% while the Midwest slipped 0.8%.

The months’ supply of homes fell to 4.3 versus 4.4. The median sales price declined to $255,400 versus $256,900 but was up 3.8% year-over-year.

Leading Indicators climbed 0.1% for the month, matching expectations.

Five of the 10 components posted positive contributions, led by consumer expectations (0.15%), the interest rate spread (0.11%), and the leading credit index (0.9%).

Three components had negative contributions, led by stock prices (-0.16%) and claims (-0.11%). The workweek and consumer goods orders components were unchanged.

Baker-Hughes Rig Count reported the U.S. rig count was down 3 rigs from last week to 1,079, with oil rigs down 3 to 885 and gas rigs unchanged at 194.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) spent the majority of the session underwater with support at $114.75-$114.25 and the 50-day moving average holding on the backtest to $114.54.

The second half run to $115.09 failed lower resistance at $115.50-$116.

Market Analysis – The Russell 3000 Index ($RUA) had an inside day, meaning a higher high or lower low wasn’t made from the previous session. Wednesday’s rebound to 1,574 failed near-term and lower resistance at 1,580-1,590.

Continued closes above 1,600 would be a more bullish development and signal a possible short-term bottom.

Fresh support is at 1,550-1,540. A close below the latter would be a continued bearish development with risk towards 1,520-1,500 and April/ February lows.

RSI is back in a slight uptrend with resistance at 40-45.

Continued closes above 50 would be a more bullish development. Support is at 35 with a move below this level signaling additional weakness.

The Materials Select Sector (XLB) showed strength after making a run to $54.41.

Prior resistance at $54.50-$54.75 held with more important hurdles at $55.50 and the 50-day moving average.

Support is at $53.50-$53.25. A close below $53 would signal additional selling pressure.

RSI is pushing resistance at 50.

Continued closes above this level would signal additional strength for a possible run towards 55-60 and the monthly peak. Support is at 45-40.

All the best,
Roger Scott.