U.S. markets were choppy during the first half of Wednesday’s action before showing strength after a tweet from President Trump that confirmed China’s Vice Premier is on the way to the U.S. to make a deal.

Of course, the devil will the in the details if a deal is announced on Friday, or if there will be a delay in negotiations with another round of fresh tariffs.

The slight momentum faded into the closing bell as the blue-chips were the only index that settled higher.

Volatility simmered slightly but edged up after trading to a lower high than the previous session.

The Dow rose 2 points, or 0.01%, while tapping a late day high of 26,118 ahead of the closing bell.

Lower resistance at 26,000-26,250 and the 50-day moving average was cleared with both holding and a close above the latter being a more bullish development.

The S&P 500 slipped 0.2% despite reaching an intraday peak of 2,897.

Prior and lower resistance at 2,900-2,925 was challenged but held with a move above the latter signaling a return of strength.

The Nasdaq gave back 0.3% after making an intraday push to 8,004.

Near-term and lower resistance at 8,000-8,050 on the 2nd-straight close below the former.

The Russell 2000 traded in an 13-point range with the low tapping 1,574.

Upper support at 1,580-1,565 was breached for the 2nd-straight session and failed to hold with a close below the latter and the 50/200-day moving averages being a continuing bearish signal.

Healthcare and Consumer Discretionary paced sector winners after rising 0.2% and 0.03%, respectively.

Utilities led sector losers after falling 1.4%. Financials and Communication Services dipped 0.2%.

Global Economy – European markets settled mostly higher despite ongoing political uncertainty with the U.K. resuming its negotiations with the European Union over Brexit.

Germany’s DAX 30 rallied 0.7% and France’s CAC 40 was up 0.4%. The Stoxx 600 Europe and UK’s FTSE 100 climbed 0.2%. The Belgium20 was down 0.6%.

Asian markets closed in the red despite better-than-expected trade news out of China.

Japan’s Nikkei fell 1.5%. Hong Kong’s Hang Seng was lower by 1.2% and China’s Shanghai was down 1.1%. South Korea’s Kospi and Australia’s S&P/ASX 200 declined 0.4%.

China’s trade surplus for April came in at $13.84 billion, much lower than forecasts of $35 billion, and below the $32.65 billion posted in March.

China’s trade surplus with the U.S. rose to $21 billion in April from $20.5 billion in March.

China imports for April unexpectedly rose by 4%, versus expectations for a decline of 3.6%, and follows a decline of -7.6% in March.

MBA Mortgage Applications rebounded 2.7%, after sliding 4.3% in the prior week, while snapping 4-straight weeks of declines. A 4.2% pop in the purchase index (from -3.7% previously), and a 0.8% gain in refinancings (from -5%) helped reverse the trend.

The average 30-year fixed mortgage rate dipped to 4.41% from 4.42% and has generally been declining since hitting a cycle high of 5.17% back in November.

However, the 5-year ARM edged up to 3.88% from 3.81%.

Refinances comprised 37.9% of loans, with that ratio remaining in a decline since hitting 54.5% in late March.

Market Sentiment – Fed Reserve Governor Lael Brainard said the Fed is discussing various tools and strategies, including inflation targeting, with the Fed aiming to achieve its inflation objective on average over a longer period of time.

She also mentioned targeting yields on specific securities, such that if short term rates were back at zero, the Fed could turn to targeting longer-term rates.

The iShares 20+ Year Treasury Bond ETF (TLT) had its 3-session winning streaked snapped despite the morning pop to $125.30.

Lower resistance from late March at $125-$125.50 held before the fade to $124.30.

Fresh and prior support is now at $124-$123.50. A close below the latter would signaling a possible backtest towards $123-$122.50 and the 50-day moving average.

Market Analysis – The Russell 3000 Index ($RUA) extended its losing streak to 3-straight sessions despite trading to an intraday high of 1,709.

Lowered resistance at 1,715-1,730 held with continued closes above the latter getting 1,740-1,755 and fresh 52-week peaks back in play.

Upper support at 1,700-1,685 was beached for the 2nd-straight session but failed to hold and levels that have been holding since early April.

A close below the latter and the 50-day moving average would be a bearish development with risk towards 1,650-1,635 and the 200-day moving average.

RSI remains in a slight downtrend but is trying to level out with support from early January at 45-40. Resistance is at 50 and prior support from March.

A move back above this level would signal a return of strength and a possible run towards 55-60.

The Spiders S&P Homebuilders ETF (XHB) extended its losing streak to 3-straight sessions after testing a low of $40.19. Late April and upper support at $40.50-$40 was breached and failed to hold.

A move below $39.50 and the 50-day moving average would be a bearish signal for additional weakness.

Near-term and lowered resistance is now at $40.50-$41.

RSI remains in a downtrend after failing upper support at 50-45 with the latter representing the March low. A move below 45 would signal additional weakness towards 40 and late December levels.

Resistance is at 55-60 with continued closes above the latter being a bullish signal for additional strength.

All the best,
Roger Scott.