U.S. markets showed continued momentum during Tuesday’s session before losing steam and pulling back for the first time in seven sessions.

The lackluster action comes ahead of tomorrow’s FOMC minutes and a number of key economic reports as traders seemed tentative ahead of the news.

The Dow fell 1% after trading in negative territory throughout the session while testing a low of 24,926 and closing back below the 25,000 level.

The Russell 2000 declined 0.9% after failing resistance at 1,550 and the 50-day moving average for the second-straight session.

The S&P 500 stumbled 0.6% despite showing midday strength while holding the 2,700 level for the third-straight session. Meanwhile, the Nasdaq slipped 0.1% to extend its losing streak to 2-straight sessions.

The index has been holding the 7,200 level for 3-straight sessions following last week’s 5.3% surge and best weekly percentage gain since December 2011.

Consumer Staples showed the most weakness with the sector falling 2.3% followed by Utilities which tumbled 1.3%. Health Care fell 1.1% while Real Estate and Industrials sank 1%.

Technology was up 0.1% and was the only sector that closed higher.

Global Economy – European markets were mostly higher on news of a potentially favorable development for the UK in its Brexit negotiations with the European Union.

Germany’s DAX 30 was up 0.8%. France’s CAC 40 and the Stoxx Europe 600 added 0.6% while the Belgium20 gained 0.4%. UK’s FTSE 100 slipped less than a point, or 0.01%.

The German February ZEW survey expectations of economic growth fell 2.6 to 17.8, ahead of expectations for a drop of 4.4.

German January PPI rose 0.5% month-over-month and 2.1% year-over-year, stronger than expectations of 0.3% m/m and 1.8%, respectively.

The UK CBI February rends total orders fell 4 to a 4-month low of 10, weaker than expectations for a drop of 3 to 11.

Asian markets gave back some of Monday’s gains amid reduced holiday trading and light volume. South Korea’s Kospi gave back 1.1% and Japan’s Nikkei declined 1%.

Hong Kong’s Hang Seng dropped 0.8% and Australia’s S&P/ASX 200 slipped 0.01%. China’s Shanghai remained closed for the Lunar New Year holiday.

There were no major economic announcements today.

Market Sentiment – Fedspeak returns this week with Philadelphia Fed Harker and Minneapolis Fed Kashkari speaking on Wednesday.

New York Fed dove Dudley will discuss the impact of hurricanes Irma and Maria on Puerto Rico and the Virgin Islands on Thursday. Boston Fed Rosengren and Cleveland Fed Mester will be speaking on Friday.

The iShares 20+ Year Treasury Bond ETF (TLT) traded in negative territory throughout the session with the low reaching $117.78.

Support at $118-$117.50 was split with risk to $116.50-$116 on a close below the latter. Resistance remains at $118.75-$119.

Market Analysis – The Russell 3000 Index ($RUA) fell 0.6% to snap a six-session winning streak after falling below 1,600 intraday but a level that held for into the closing bell.

Near-term resistance is at 1,610-1,620 and the 50-day moving average held with continued closes above the latter being a bullish signal.

Support is at 1,590-1,580 if 1,600 fails with a move below the latter signaling a possible short-term top.

RSI is trying to clear and hold resistance at 50 and prior November support. Continued closes above this level would be a slightly bullish development. Support is at 40.

The Consumer Staples Select Spiders (XLP) sank 2.2% after testing an intraday low of $54.28 while closing back below its 200-day moving average.

Fresh support at $54.25-$54 held with a move below the latter signaling additional weakness. Lowered resistance is at $54.75-$55.

RSI is back in a downtrend after failing resistance at 50. Support is at 35-30 on continued weakness.

All the best,
Roger Scott