U.S. markets were choppy on Wednesday after languishing in tight trading ranges while keeping fresh all-time highs in play. Corporate numbers were mixed but continue to dispel worries of an earnings recession Wall Street feared coming into the year.

The 1Q earnings parade reaches its peak this week but will continue into early June and will likely dictate a continued rally to lifetime highs or backtest to fresh support levels over the next few weeks.

Meanwhile, volatility edged higher while holding a key level of resistance.

The Russell 2000 nudged up 0.2% following the morning trip to 1,594 and 2nd-straight close above the 1,585 level.

Major and upper resistance from February at 1,600 was challenged but still needs to be cleared and held to turn the trend higher.

The Nasdaq was down 0.2% despite trading to a fresh all-time intraday high of 8,139.

Fresh and lower resistance at 8,150-8,200 held with blue-sky territory towards 8,250-8,400 on a close above the latter.

The Dow dipped 0.2% after testing a 2nd-half low of 26,582.

Current and upper support at 26,500-26,250 held with a close below 26,000 and the 50-day moving average signaling a near-term top.

The S&P 500 also slipped 0.2% despite the morning push to 2,936.

Lower resistance and the all-time high at 2,940 held for the 2nd-straight session with breakout potential towards 2,975-3,000 on a close above 2,950.

Real Estate and Utilities were the strongest sectors after rising 0.7% and 0.6%.

Energy was the weakest sector after sinking 1.8%. Materials and Communications Services were down 0.6% and 0.5%, respectively.

Global Economy – European markets settled mostly lower after Prime Minister Theresa May said finding a Brexit compromise with the EU cannot be open ended as both sides are pressing on with the talks this week, including a meeting to discuss financial services.

The Belgium20 tanked 1.4% and UK’s FTSE 100 stumbled 0.7%. France’s CAC 40 fell 0.3% and the Stoxx 600 Europe was off 0.1%. Germany’s DAX 30 rose 0.6%.

Germany’s IFO business climate index for April fell to 99.2 from 99.7 in the previous month, missing forecasts for a print of 99.9.

Asian markets settled mixed despite news of another round of trade negotiations between China and the United States that will begin on April 30th.

Australia’s S&P/ASX 200 surged another 1% to close at a 10-year peak while China’s Shanghai edged up 0.1%.

South Korea’s Kospi fell 0.9% and Hong Kong’s Hang Seng was lower by 0.5%. Japan’s Nikkei declined 0.3%.

MBA Mortgage Applications dropped -7.3%, more than doubling the prior -3.5% decline, and bringing its 3-week slide to a cumulative -16.4%.

The refinancing index continues to be the weak link, tanking -11% on the week after -8.2% and -11.4% in the prior two periods. The purchase index was down 4.1% versus 0.9% previously.

The 30-year fixed mortgage rate climbed to 4.46% from 4.44% previously.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd-straight session following the intraday push to $123.59.

Fresh and lower resistance at $123.50-$124 was cleared and held with a close above the latter signaling additional momentum.

Rising support is at $123-$122.50.

 

Market Analysis – The Invesco QQQ Trust (QQQ) had its 7-session winning streak snapped despite trading to an all-time intraday high of $190.71.

Fresh and lower resistance at $191-$191.50 held with blue-sky territory towards $192.50-$195, depending on momentum.

Current support is at $189.50-$189.

A close back below $188-$187.50 would be a slightly bearish development and signal a possible near-term top.

RSI is back in a downtrend with support at 75-70. A move below the latter would signal additional risk towards 65-60. Resistance remains at 80.

The Financial Select Sector Spiders (XLF) has been in an 8-session holding pattern with Wednesday’s low tapping $27.28. Upper support at $27.25-$27 held.

A close below $26.75 and the bottom of the current trading range would be a bearish development.

Near-term and major resistance is at $27.50.

Continued closes this level could lead to a run towards $27.75-$28 and early October highs.

The 50-day moving average has cleared the 200-day moving average to form a golden cross. This is typically a bullish technical pattern for higher highs.

RSI is flatlining with support at 60-55 and the latter representing the month low. Resistance is at 70 and a level that has been holding throughout the year.

All the best,
Roger Scott.