Bears Return Despite Positive Trade Chatter

U.S. markets were sluggish throughout Monday’s first half of action as Wall Street awaited developments from trade talks with China on Thursday and the light start to the 3Q earnings season. The major indexes turned positive midday following comments by White House economic advisor Larry Kudlow who said the U.S would be open to anything China brings to the table, including a short-term deal.

More enthusiasm came later in the day after the Chinese Commerce Ministry confirmed China is ready to do a deal on the parts of the negotiations both sides agree upon with a timetable for the harder issues to be worked out next year. Despite the positive news, the major indexes settled lower after pushing prior resistance levels with volatility settling back above a key level of support.

The S&P 500 fell 0.5% after trading in a 24-point range and testing an morning low of 2,935. Upper support at 2,950-2,925 failed to hold with the close back below the 50-day moving average being a cautious signal.

The Dow was down 0.4% following the morning backtest to 26,424. Fresh and upper support at 26,400-26,200 held with the close back below the 50-day moving average also being a slightly bearish signal.

The Nasdaq was lower by 0.3% despite testing an intraday high of 8,013. Lower resistance at 8,000-8,050 and the 50-day moving average was cleared but held for the 2nd-straight session.

The Russell 2000 slipped 0.2% after testing a 2nd half high of 1,507 but failing to hold the 1,500 level into the closing bell. Near-term and lower resistance at 1,510-1,525 was challenged but held with a close above the latter and the 50/200-day moving averages being more bullish developments.

There was no sector strength with Communication Services closing flat for the session. Energy and Consumer Staples led sector weakness after giving back 0.9% and 0.8%, respectively, while Industrials and Finance declined 0.5%.

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E-Trade (ETFC) and Moody's (MCO) upgraded to Buy from Neutral at UBS
JetBlue (JBLU) upgraded to Buy from Neutral at Buckingham
Match Group (MTCH) upgraded to Buy from Neutral at Nomura Instinet

Entegris (ENTG) downgraded to Hold from Buy at Deutsche Bank
Ingersoll-Rand (IR) downgraded to Equal Weight from Overweight at Stephens
Wendy's (WEN) downgraded to Market Perform from Outperform at Cowen

Before the open: Azz (AZZ), Domino’s (DPZ), Eros International (EROS)

After the close: Helen of Troy (HELE), Levi Strauss (LEVI)

Tuesday's economic reports (EST): 
NFIB Small Business Optimism Index - 6:00am
PPI-FD - 8:30am
Redbook - 8:55am

Gold closed at $1504.40 an ounce, down $8.50
Silver settled at $17.54 an ounce,  down $0.08
Copper finished at $2.58 a pound, up $0.02
Crude Oil was at $52.96 a barrel, down $0.06
Bitcoin Investment Trust (GBTC) ended at $9.85 up $0.06

I hope this helps you prepare for the trading day. Make it a great one!

   Todd Mitchell

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