U.S. markets showed continued weakness and downside momentum on Thursday with the major indexes setting another round of fresh 52-week lows.
Much of the negative sentiment came from a looming government shutdown and the continued fallout from the Fed’s latest interest rate hike.
The market reached session lows late in the afternoon following news the President would not be signing a rushed and proposed spending bill, likely signaling a government shutdown.
The slight rebound into the close was minimal as the technical damage over the past few months remains the more important picture.
The Nasdaq tumbled 1.6% following the pullback to 6,447.
Fresh support at 6,450-6,400 held with a move below the latter getting September 2017 levels at 6,350-6,300 in play.
The Russell 2000 sank 1.7% after trading down to 1,313 during the second half of action.
Two-year support at 1,325-1,300 is in play on the close above the former.
The Dow dropped 2% after trading to an intraday low of 22,644. Longer-term support at 22,600-22,400 held with risk towards 22,250-22,000 and October 2017 support levels on a move below the latter.
The S&P 500 was lower by 1.6% following the backtest to 2,441. Upper and major support from September 2017 at 2,450-2,425 with risk to 2,400 on a move below the latter.
There was no sector strength for the 4th-straight session with Utilities down just 0.06% and was the least affected.
Energy led sector weakness after sinking 2.8%. Consumer Discretionary tanked 2.2% while Industrials and Technology were hit for 1.8%.
Global Economy – European markets closed lower across the board after the BOE left interest rates unchanged and weaker-than-expected economic news.
The Belgium20 was hammered for 2.4% while France’s CAC 40 stumbled 1.8% and the Stoxx 600 Europe declined 1.5%. Germany’s DAX 30 lost 1.4% and UK’s FTSE 100 was down 0.8%.
The Bank of England voted 9-0 to keep its benchmark interest rate unchanged at 0.75% and to maintain its asset purchase target at 435 billion pounds.
UK November retail sales ex-auto fuel rose 1.2%, topping expectations of 0.2%. November retail sales including auto fuel rose 1.4%, well above forecasts of 0.3%.
UK December CBI retailing reported sales unexpectedly fell -32 to a 14-month low of -13, missing estimates for a print of 15.
Asian markets settled lower after Japan remained dovish on interest rates and its market paying the price as Japan’s Nikkei plummeted 2.8%.
Australia’s S&P/ASX 200 sank 1.3% while South Korea’s Kospi and Hong Kong’s Hang Seng were down 0.9%. China’s Shanghai was off 0.5%.
The Bank of Japan kept its benchmark interest rate at -0.1% and its target for the 10-year Japanese government bond yield near 0%, as expected.
The BOJ also maintained its JGB purchase pace of about 80 trillion yen a year.
The Philadelphia Fed Business Outlook Survey fell to a 2-year low of 9.4 in December, down from 12.9 in November. The components were mixed as employment edged up to 18.3 from 16.3, with the workweek falling 0.5 from 6.3.
New orders improved to 14.5 from 9.1. Prices paid slipped to 38.0 from 39.3, while prices received moved up to 26.2 from 21.9.
The 6-month general business index rose to 31.7 from 27.2, with employment at 34.7 from 32.5, and new orders at 41.2 from 46.5.
The future prices paid rose to 60.2 from 59.5, and prices received were at 45 from 58.6.
Initial Jobless Claims rose 8,000 to 214,000, missing forecasts of 220,000. The 4-week moving average dipped to 222,000 from 224,750. Continuing claims increased another 27,000 to 1,688,000 after jumping 25,000 the prior week.
Leading Indicators rose 0.3% to 111.8 in November, topping forecasts for a flat reading.
Seven of the 10 indicators made positive contributions, led by building permits (0.14%) and ISM new orders (0.13%). Of the three indicators that declined, jobless claims led the way with a -0.21% decline.
The downward revision to October resulted from consumer goods orders, now -0.19% from unchanged, and the workweek, at -0.07% from unchanged.
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) had its 4-session winning streak snapped despite trading to a high of $122.03.
Fresh and upper resistance at $121.50-$122 held with a move above the latter signaling additional strength.
Support at $120.50-$120 held with a close below the latter signaling a possible near-term top.
Market Analysis – The Spider Small-Cap 600 ETF (SLY) fell for the 5th time in 6 sessions after testing a low of $58.44. September 2017 support at $58.50-$58 held.
A close below the latter would likely signal additional selling pressure with risk towards $57-$55.
Lowered resistance is at $59.50-$60 with continued closes back above $62-$62.50 signaling a possible short-term bottom.
RSI remains in a downtrend and is signaling oversold levels with support at 20.
There is risk to 15-10 and October lows on continued selling pressure. Resistance is at 25-30.
The Industrials Select Sector Spider (XLI) closed lower for the 9th time in 12 sessions after bottoming at $63.13 and fresh 52-week low. Longer-term and upper support from March 2017 at $63-$62.50 held.
A move below the latter would be a continued bearish signal with risk towards the $60 level.
Lower resistance is at $64.50-$65. Continued closes above $67 would be a more bullish development and signal a possible near-term bottom.
RSI is approaching support at 25-20 and is in oversold conditions.
Resistance is at 30 with continued closes back above this level being a slightly bullish signal.
All the best,
Roger Scott.