U.S. markets showed strength on the open but were choppy throughout the first half of action before steadily declining into the closing bell. Volatility spiked with the market moving at least 1% for the 23rd time this year versus 10 times for all of 2017.

The Nasdaq tumbled 2.9% after trading to a low of 6,963 while holding the 7,000 level into the closing bell.

The S&P 500 stumbled 1.7% after making a backtest to 2,596 but was able to hold the 2,600 level.

The Dow dropped 1.4% after testing a late session low of 23,708 to finish back below the 24,000 level. The Russell 2000 sank 2% after falling to a low of 1,508 while holding 1,500.

Utilities and Real Estate were the only sectors to show strength after rising 1.4% and 0.2%, respectively. Technology was the weakest sector after sinking 3.2% while Financials and Consumer Discretionary dropped 2%.

Global Economy – European markets showed strength despite weaker-than-expected economic data. Germany’s DAX 30 and UK’s FTSE 100 surged 1.6% while the Stoxx Europe rallied 1.2%. France’s CAC 40 jumped 1% and the Belgium20 rose 0.7%.

Eurozone March economic confidence fell 1.6 to a 6-month low of 112.6, weaker than expectations for a decline of 0.8 to 113.3.

The March business climate indicator slipped 0.14 to 1.34, weaker than expectations for dip of 0.12.

Eurozone February M3 money supply rose 4.2% year-over-year, below forecasts of 4.6% and the smallest pace of increase in 3 years.

The German February import price index fell 0.6% month-over-month, weaker than expectations for a dip of 0.3% and the biggest decline in 8 months.

Asian markets were higher across the board and were led by Japan’s Nikkei which zoomed 2.7%. China’s Shanghai was up 1% and Hong Kong’s Hang Seng gained 0.8%.

Australia’s S&P/ASX 200 was higher by 0.7% and South Korea’s Kospi rose 0.6%.

Japan February PPI services prices were up 0.6% year-over-year, weaker than expectations for a rise of 0.7% and the slowest pace of increase in 6 months.

S&P Case-Shiller was up a seasonally adjusted 0.8% month-over-month for January, versus expectations for an advance of 0.7%. All 20 cities posted annual gains, with the top 3 led by Seattle (12.86%), Las Vegas (11.06%), and San Francisco (10.20%). Chicago ranked last (2.37%).

Richmond Fed Manufacturing Index fell 13 points to 15 in March, giving back the 14 point surge to 28 in February, and below expectations for a print of 22.

The employment component dropped back to 11 from 25, with wages at 22 from 23. New orders declined to 17 from 27. Capital expenditures were down to 16 from 28.

The prices paid index jumped to 2.39% versus 1.89% previously, with prices received at 1.54% from 1.57%. The business activity shipments index rose to 55 from 45. The future employment index increased to 31 from 22, with wages at 42 from 38, while new orders edged up to 45 from 40.

Capital expenditures were 39 from 36. The prices paid index was 2.59% from 2.69%, and prices received were 1.84% from 1.74%.

Consumer Confidence Index decreased to 127.7 in March, down from 130 in February, and below forecasts of 131.

Market Sentiment – Atlanta Fed Raphael Bostic steered clear of current policy and the economy in his remarks at the Operation HOPE Global Forums 2018 Annual Meeting.

The iShares 20+ Year Treasury Bond ETF (TLT) snapped a two-session slide after trading to a high of $121.12.

Fresh resistance at $121-$121.50 held with a close above the latter being a continued bullish development.

Rising support is at $120.25-$119.75 and the 50-day moving average which is showing signs of flattening out.

Market Analysis – The Spider Small-Cap 600 ETF (SLY) fell for the third time in four sessions despite an intraday run to $134.52.

Upper resistance at $134-$134.50 and the 50-day moving average held for a third-straight session before the fade to $131.91 into the closing bell.

Support is at $131.75-$131.25 with a close below $131 signaling additional weakness.

RSI is back in a downtrend with near-term support at 40. A close below this level would signal additional weakness towards 30 and early February support levels.

The Utilities Select Spider (XLU) jumped 1.4% after reaching a peak of $50.80 while closing above the $50 level. Near-term resistance at $50.75-$51 held with a close above the latter being a continued bullish development.

Rising support at $50-$49.50 and the 50-day moving average. A close below $49 would signal another short-term top.

RSI is pushing fresh resistance at 60 on continued strength with a close above this level likely leading to additional strength. Support is at 50.

All the best,
Roger Scott