The small-caps led the overall market pullback while the blue-chips showed strength. Volatility continues to settle down after testing another weekly low but remains above key support levels.
The Russell 2000 was down for the 6th time in 7 sessions after sinking 1.6% while testing a low of 1,431. Prior and upper supper at 1,440-1,420 was breached and failed to hold with the recent 52-week low at 1,422.
The Nasdaq had its 3-session winning streak snapped after falling 0.4% on the backtest to 7,034. Upper support at 7,000-6,950 held with a close below the latter likely leading to additional selling pressure.
The S&P 500 slipped a half-point, or 0.02% following the second half fade to 2,637. Upper support at 2,625-2,600 held with a close below the latter being a bearish development.
The Dow was up 0.3% after trading within a 267-point range and tapping a morning high of 24,740. Near-term and lower resistance at 24,800-25,000 held for the 2nd-straight session.
Utilities led sector strength after rising 0.9%. Real Estate and Consumer Staples were higher by 0.7% and 0.6%, respectively.
Materials paced sector laggards after dropping 1.2%, respectively. Financials fell 0.7% while Consumer Discretionary and Communications Services gave back 0.5%.
Global Economy – European markets were slightly weak after the ECB kept its interest rates unchanged and said it plans to end its bond buying this month. ECB President Mario Draghi also downgraded the bank’s economic forecast for the eurozone for this year and next, citing the threat of protectionism, vulnerabilities in emerging markets and financial market volatility.
France’s CAC 40 slipped 0.3% and the Stoxx 600 Europe was off 0.2%. Germany’s DAX 30 and UK’s FTSE 100 dipped 0.04%. The Belgium20 was down less than a point.
The ECB held rates steady and confirmed it will end its bond purchase program this month, as expected. The central bank also revised slightly downwards its two-year economic forecast. It now expects the eurozone economy to grow 1.9% this year and 1.7% in 2019, compared with the 2% and 1.8% growth rates projected in September.
German November CPI was left unrevised at 0.1% month-over-month and 2.2% year-over-year.
Asian markets settled higher as worries over global trade tensions eased on signs that the U.S. and China are both willing to compromise to end their trade disputes.
Hong Kong’s Hang Seng was up 1.3% and China’s Shanghai gained 1.2%. Japan’s Nikkei soared 1% and South Korea’s Kospi added 0.4%. Australia’s S&P/ASX 200 edged up 0.1%.
Initial Jobless Claims fell 27,000 to 206,000 in the week ending December 8th, versus expectations for 226,000 first-time claims.
The trade price report was weak, with a 1.6% month-over-month decline for import prices in November and a 0.9% drop for export prices.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) extended its losing streak to 3-straight sessions after testing a low of $117.98. Fresh and upper support at $118-$117.50 held with a close below the latter getting $117 and the 200-day moving average back in play.
Lowered resistance is at $118.50-$119.
Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) was up for the 3rd time in 4 sessions despite a midday backtest to $245.17. Support at $245-$244.50 held with a move below the latter getting $242.50-$240 back in play.
Lowered resistance at $247-$247.50 held on the opening pop to $247.86 with more important hurdles at $249-$250 and the 200-day moving average.
RSI is in a slight uptrend with resistance at 45-50. A move above the latter would be a bullish development. Support is at 40. A move below this level would signal additional weakness with risk towards 35-30 and November/ October lows.
Communication Services (XLC) had its 3-session winning streak snapped following the pullback to $43.76. Upper support at $43.75-$43.25 held with a move below the latter signaling additional weakness towards $42.50 and fresh 52-week lows.
Near-term resistance is at $44.50-$45. Continued closes back above $45.50 and the 50-day moving average would be a slightly bullish signal. However, last month’s death cross was a bearish development and continues to signal lower lows down the road.
RSI is in a slight downtrend with support at 45-40. A close below the latter would be a bearish signal with weakness towards 35-30. Resistance is at 50.
All the best,
Roger Scott.