U.S. markets opened in positive territory following another round of solid earnings reports and a wave of M&A news. However, the gains started to fade into the second-half of action as traders turned their focus towards the FOMC decision from the Fed on Wednesday and the monthly jobs report on Friday.

The major indexes closed on their lows but showed gains for April although the technical outlook has turned slightly bearish.

The Russell 2000 sank 0.9% after closing in the red for the 7th-time in 8 sessions while bottoming at 1,541. The close below its 50-day moving average was a slightly bearish development despite the index gaining 0.8% in April.

The Nasdaq gave back 0.8% after failing its 50-day moving average for a second-straight session while testing a low of 7,065 into the close. The index added 3 points, or 0.1%, for the month.

The S&P 500 fell 0.8% after settling at 2,648 to snap a 3-session win streak. A move towards 2,600 and the 200-day moving average is in play on continued weakness.

The Dow declined 0.6% following the backtest to 24,163 and session low. The index held 24,000 for the 4th-straight session with a close below this level getting the 200-day moving average back in play.

For the month, the S&P 500 and Dow gained 0.3%.

Energy was flat for the session and was the only sector that didn’t close in negative territory. Health Care and Industrials were the leading laggards after sinking 1.5% and 1.3%, respectively.

For the month, Energy zoomed 9.6% while Health Care soared 4%. Consumer Staples fell 1.5% while Industrials declined 0.4% and were the only sector laggards over the past month.

Global Economy – European markets closed mostly higher to start the week while ending April with solid gains. UK’s FTSE 100 was up 0.1% while surging 6.4% for the month.

Germany’s DAX 30 gained 0.3% for the session and 4.3% in April.
France’s CAC 40 jumped 0.7% to add to its monthly gain of 6.8%. The Stoxx 600 Europe climbed 0.2% for the day and was higher by 3.9% for the month. The Belgium20 slipped 0.1% to start the week.

Eurozone March M3 money supply rose 3.7% year-over-year, weaker than expectations of 4.1%.

German March retail sales unexpectedly fell 0.6% month-over-month, weaker than expectations for a gain of 0.8%.

Asian markets were higher across the board following better-than-expected economic news. Hong Kong’s Hang Seng zoomed 1.7% while South Korea’s Kospi rallied 0.9%. Japan’s Nikkei rose 0.7% and Australia’s S&P/ASX 200 added 0.5%. China’s Shanghai gained 0.2%.

China April manufacturing PMI slipped 0.1 to 51.4, stronger than expectations for a dip of 0.2. The April non-manufacturing PMI unexpectedly rose 0.2 to 54.8, stronger than expectations for a decline of 0.1.

Personal Income rose 0.3% in March, with spending rising 0.4%.

Chicago PMI rose 0.2 points to 57.6 in April, but shy of expectations of 57.8.

Pending Home Sales Index rose 0.4% to 107.6 in March. Regionally, sales were higher in the South (2.5%) and the Midwest (2.4%), but declined in the Northeast (-5.6%), due in part to weather, and in the West (-1.1%).

Sales have continued to decline on an annual basis, with March off 4.4% year-over-year, following the 4.7% drop in February, and January’s 1.1% year-over-year decline. Lack of inventory remains a constant drag.

Dallas Fed Manufacturing Survey for April was at 21.8, topping forecasts of 18.

Atlanta Fed’s initial Q2 GDPNow estimate jumped to 4.1% compared to the 2.3% advanced Q1 GDP just released last week.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) extended its win streak to 3-straight session after testing a high of $119.56. Upper resistance at $119-$119.50 was cleared but the 50-day moving average held. Rising support is at $119-$118.50.

Market Analysis – The Russell 3000 Index ($RUA) showed opening strength after making a run to 1,590 with resistance at 1,590-1,600 and the 50-day moving average holding.

Continued closes above the latter would be a bullish development. The backtest to 1,569 held support at 1,565-1,560 with a move below the latter signaling a short-term top.

RSI is back in a downtrend after failing resistance at 50. Continued closes above this level would signal strength. Support is at 40 with risk to 30 and February/ March lows on a close below this level.

The Consumer Staples Select Spiders (XLP) closed lower for the first time in four sessions after testing a low of $50.36. Near-term support at $50.25-$50 held with a close below the recent $52-week low of $49.76 being a bearish development. Resistance is at $50.75-$51.

We mentioned earlier this month that the 50-day moving average had fallen below the 200-day moving average to form a death cross. This is typically a bearish development for lower lows.

RSI has been struggling to clear resistance at 40. Support is at 30-25 and February/ March lows.

All the best,
Roger Scott.