U.S. markets opened lower with the losses accelerating into the second half of action as fears of an inverted yield curve spooked Wall Street.

It also appears that the U.S.-Sino deal was an agreement to agree, following more trade rhetoric, with much of the heavy lifting on detail yet to be done in the first three months of the year.

The Bush memorial ahead of the market closure tomorrow, caused a 25% spike in volatility with the VIX closing above a key level of resistance.

The Russell 2000 plummeted 4.4% after trading to an intraday low of 1,479.

Prior and upper support at 1,480-1,460 was breached but held with a close below the latter leading to fresh and prior October lows.

The Nasdaq stumbled 3.8% following the backtest to 7,150.

Upper support at 7,150-7,100 held with a move below the latter signaling additional risk towards 7,000-6,900.

The S&P 500 sank 3.2% following the pullback to 2,697.

Major and upper support at 2,700-2,675 held with risk to 2,625-2,600 and fresh October lows on a move below 2,675.

The Dow tumbled 3.1% after testing a session low of 25,008. Shaky support at 25,000-24,800 held on the close back below the 200-day moving average held with risk to 24,600-24,400 on continued selling pressure.

Utilities were the only sector to show strength after climbing 0.1%

Industrials were the the worst performing sector after sinking 4.4%. Technology and Consumer Discretionary dropped 3.8% and 3.6%, respectively.

Global Economy – European markets were lower across the board following ongoing Brexit developments.

The Belgium20 and the Germany’s DAX 30 was down 1.1%. France’s CAC 40 and the Stoxx 600 Europe dropped 0.8% while UK’s FTSE 100 fell 0.6%.

Eurozone October PPI rose 0.8% month-over-month and 4.9%, topping forecasts of 0.5% and +4.5%, respectively.

The UK November Markit/CIPS construction PMI rose 0.2 to 53.4, stronger than expectations of for a slide of 0.7 to 52.5.

UK November BRC sales like-for-like fell 0.5% year-over-year, missing estimates for a gain of 0.3%.

Asian markets settled mixed. China’s Shanghai added 0.4% and Hong Kong’s Hang Seng rose 0.3%.

Japan’s Nikkei sank 2.4% while South Korea’s Kospi declined 1.1% and Australia’s S&P/ASX 200 fell 1%.

U.S. Economy

There was no major economic reports released.

Market Sentiment – New York Fed Williams expects continued strong economic growth as fiscal policy is providing a tailwind. He said wage growth is showing signs of increasing, while inflation is near the 2% goal and is likely to be moving a little above that level.

Williams added the balance sheet normalization is proceeding smoothly and he expects further gradual increases in rates will be necessary.

The FOMC is widely expected to hike rates another 25 bps on December 19th, bringing this year’s tightenings to four, as indicated by the dot plot.

What happens next year is still up in the air, and not even the FOMC knows at this point how its rate trajectory will shape up. However, analysts do suspect the FOMC’s 2019 dot plot median will be nudged down to only two tightenings, versus the three currently in place.

The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 4th-straight session after soaring to a high of $118.67.

Fresh and early September resistance at $118.50-$119 was challenged but held with a move above the latter being a continuing bullish signal.

Rising support is at $117.50-$117 and the 200-day moving average.

Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) tumbled to an intraday low of $250.38 with fresh support at $250.50-$250 holding.

A move back below $249.50-$249 and 200-day moving average would be a slightly bearish signal with risk towards $247.50-$245.

Lowered resistance is at $252-$252.50 held with more important hurdles at $254.50-$255 and the 500-day moving average.

RSI is back in a downtrend with support is at 45-40.

A move below the latter would signal additional pressure with risk towards 35-30 and November/ October lows. Resistance is at 55-60.

The Consumer Discretionary Select Spiders (XLY) fell for just the 2nd-time in 7 sessions following the backtest to $105.77.

Fresh support at $105.50-$105 held with a move below the latter signaling additional weakness.

Lowered resistance is at $106.50-$107 followed by $108-$108.50 and the 50/200-day moving averages.

The major moving averages are also close to forming a death-cross with the 50-day on track to fall below the 200-day.

This is typically a bearish setup for lower lows.

RSI is in a downtrend with fresh support at 45-40 on the close back below the 50 level resistance at 60. Resistance is at 55.

All the best,
Roger Scott.