U.S. markets traded in a tight range on Wednesday as Wall Street digested another round of mixed 1Q earnings.

The slightly lower finish comes ahead of the release of the DOJ’s redacted version of the Mueller report on Thursday morning along with the market being closed for Good Friday.

Volatility spiked to a fresh 2019 low on the open before immediately reversing course 30 minutes afterwards while staying slightly elevated the rest of the session.

The action could be a slight warning signal for a more volatile Thursday with regular April options expiring a day early due to the holiday.

The Russell 2000 fell 1% after testing an intraday low of 1,561.

Fresh and upper support at 1,565-1,550 was breached but held on the close below the 200-day moving average with a move below 1,550 and the 50-day moving average signaling additional weakness.

The S&P 500 slipped 0.2% after kissing a late session low of 2,895.

Current and upper support at 2,900-2,875 held for the 4th-straight session with a move below the latter getting 2,850 back in play.

The Nasdaq was lower by 4 points, or 0.05%, following the backtest to 7,973 during the second half of action. Fresh and upper support at 8,000-7,925 fIled to hold with a move below 7,900 signaling a possible near-term top for the index.

The Dow was down 3 points, or 0.01%, after trading in a 100-point range while tapping a low of 26,391.

Near-term and upper support at 26,250-26,000 easily held with a move below the latter being a slightly bearish signal.

Technology and Consumer Staples were sector leaders after rising 0.6% and 0.5%.

Financials were higher by 0.3%.

Healthcare was the weakest link after sinking 2.9%. Real Estate and Materials also lagged, falling 1% and 0.6%, respectively.

Global Economy – European markets closed mostly higher despite slightly disappointing economic news of the UK.

France’s CAC 40 rose 0.6% and Germany’s DAX 30 added 0.4%. The Stoxx 600 Europe nudged up 0.1% and UK’s FTSE 100 was up just over a point, or 0.02%. The Belgium20 gave back 0.4%.

UK March CPI was up 1.9% year-over-year, missing forecasts for a print of 2%.

Asian markets settled mixed after Japan booked a trade deficit for the first time in 3 years while China’s GDP was in-line.

China’s Shanghai and Japan’s Nikkei rose 0.3%. Australia’s S&P/ASX 200 declined 0.3% and South Korea’s Kospi slipped 0.1%. Hong Kong’s Hang Seng fell 5 points, or 0.2%.

Japan’s trade surplus decreased 32% to 528.5 billion yen as exports fell 2.4% year-over-year while imports jumped 1%.

Japan’s surplus with the US was up nearly 10% year-over-year, reaching 683.6 billion yen, with US exports up 4.4%.

China GDP grew at 6.4%, versus expectations of 6%-6.5%, and matches Q4 for the weakest pace of growth in 10 years.

MBA Mortgage Applications fell 3.5% following the 5.6% drop the prior week but follows four consecutive weekly gains totaling 31.4%. Refi’s led the decline with an 8.2% slide after the prior 11.4% plunge.

The purchase index edged up 0.9%. The 30-year fixed mortgage rate rose slightly to 4.44% from 4.40%, with the 5-year ARM moving up to 3.88% from 3.78%.

The trade deficit narrowed 3.4% to -$49.4 billion in February after shrinking 14.6% in January to -$51.1 billion. Exports rose 1.1% versus the 1% prior increase, while imports edged up 0.2% from -2.6%.

Excluding petroleum, the deficit it was -$48.2 billion from -$50.2 billion. The real goods balance also decreased to $81.8 billion versus -$83.5 billion, with goods exports up 0.6% from 2.2%, and goods imports slipping 0.4% from -2.1%.

The deficit with Mexico widened to -$7.4 billion from -$5.8 billion and it was -$0.1 billion with Canada versus -$0.7 billion.

Wholesale Inventories rose 0.2% in February, with sales up 0.3%, missing expectations of 0.3% and 0.8%, respectively, and follows gains of 1.2% and 0.5% in January. The I/S ratio should was unchanged at January’s 1.35 print.

The Fed’s Beige Book reiterated growth at a slight to moderate pace, though a few Districts said there was some strengthening in activity, as analysts expected.

The anecdotal reports didn’t suggest any change overall, however, with contacts looking for slight-to-moderate growth in the months ahead. Consumer spending was mixed with retailer and auto sales still sluggish. Most Districts reported stronger home sales, but some noted low demand for higher-priced homes.

Employment continued to increase, and was mostly concentrated in high-skilled jobs, with the labor market remaining tight and restraining the growth rate.

The reported noted there has been continued wage pressures, but growth is still moderate, while firms continue to offer non-pecuniary perks. Prices have risen modestly, in part on tariffs, freight costs, and rising wages, but the ability of firms able to pass on costs to consumers mixed.

Atlanta Fed boosted its Q1 GDPNow estimate to 2.43%.

Market Sentiment – St. Louis Fed James Bullard expects the yield curve to continue to steepen as the economy improves this year. He note the labor market continues to perform well while the low inflation and jobless rates with the Phillips Curve relationship remains dormant.

Philadelphia Fed Patrick Harker said he could see at most, one hike for 2019 and one for 2020, but reiterated it is important to be patient as the data roll in.

He is in wait-and-see mode and is keeping an eye on risks. He still expects sustained growth with a still strong labor market and muted inflation.

The iShares 20+ Year Treasury Bond ETF (TLT) rebounded after showing strength for just the 2nd time in 5 sessions while testing a high of $122.57.

Lower resistance at $122.50-$123 was breached but held with a move above $124 signaling a possible near-term bottom.

Major support remains at $122 if the 50-day moving average fails to hold with risk towards $121.50-$121 on a close below these levels.

Market Analysis – The Russell 3000 Index ($RUA) traded to a fresh 2019 high of 1,720 with lower resistance from late August 2018 at 1,720-1,735 getting breached but holding.

A close above the latter gets 1,750-1,765 and all-time highs in play. A golden cross formed at the start of the month with the 50-day moving average clearing the 200-day moving average. This is typically a bullish signal for higher highs.

The fade to 1,705 afterwards held current and upper support at 1,700-1,685 and levels that have been holding since the beginning of April.

A close below the latter would be a slightly bearish development with risk towards 1,675-1,660 and the 50-day moving average.

RSI is in a slight downtrend with support at 60.

A move below this level would be a bearish signal with further risk towards 55-50 and the latter representing the March low.

Resistance is at 70 and a level that has been holding since early February. Continued closes above 70 would signaling additional strength towards 75-80 and January 2018 highs.

The Energy Select Sector Spider (XLE) has been in a 7-session trading range following the beginning of the month push towards its 200-day moving average.

Current and lower resistance at $68-$68.25 was cleared but held on the morning run to $68.16. Continued closes above the latter would be a slightly bullish development for a possible test towards $69-$69.25 and early November hurdles.

Near-term support is at $67-$66.75.

A close below $66.50 would be a slightly bearish development with downside risk towards $66-$65.75 and the 50-day moving average.

RSI has been steady with resistance at 60.

A move above this level would signal additional momentum towards 65-70 and March highs. Support at 50 has been holding since late March with risk towards 45-40 on a close below this level.

All the best,
Roger Scott.