Small-Caps Get Smacked Following Disappointing Data

U.S. markets showed strength on Tuesday’s open but quickly reversed course following disappointing manufacturing data that showed the U.S./ China trade war hurt exports. The news followed disappointing economic news overseas and is only fanning long-standing fears of slowing global growth.

Although U.S.-China trade talks are expected to resume next week, expectations are low for a near-term breakthrough. Meanwhile, volatility closed back above key resistance levels and is once again signaling a cautious tone for the overall market.

The Russell 2000 was down for the 9th time in 11 sessions after tanking 2% while tapping a late day low of 1,491. Prior and upper support from late August at 1,500-1,485 was breached and failed to hold on the close back below the 200-day moving average. There is risk towards 1,465-1,450 on a move below 1,485.

The S&P 500 sank 1.2% after tapping a 2nd half low of 2,938. Key support at 2,950 and the 50-day moving average was breached and failed to hold with downside potential towards 2,925-2,900 on continued weakness.

The Nasdaq fell for the 3rd time in 4 sessions after giving back 1.1% and testing an intraday low of 7,906. Near-term and upper support at 7,900-7,850 held on the 4th-straight close below the 50-day moving average. There is risk towards 7,750-7,700 and the 200-day moving average if 7,850 fails to hold.

The Dow dropped 1.28% after trading to a 1st half high of 27, 046 but failing to hold key resistance at the 27,000 level for the 7th-straight session. Prior and major support from late July and early September at 26,600 was breached and failed to hold on the tumble to 26,562 afterwards. There is risk towards 26,400-26,200 on a close below 25,550 and the 50-day moving average.

Industrials and Materials lead sector weakness after plummeting 2.4% while Energy sank 2.3%. There was no sector strength.

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ANALYST UPGRADES/DOWNGRADES

Ericsson (ERIC) upgraded to Buy from Hold at Canaccord
Tradeweb Markets (TW) upgraded to Overweight from Equal Weight at Barclays
VMware (VMW) upgraded to Outperform from Market Perform at Wells Fargo

Celanese (CE) downgraded to Neutral from Buy at Goldman Sachs
Public Storage (PSA) downgraded to Underperform from In Line at Evercore ISI
Welltower (WELL) downgraded to Equal Weight from Overweight at Barclays

WEDNESDAY'S EARNINGS ANNOUNCEMENTS  
Before the open: Acuity Brands (AYI), Lamb Weston Holdings (LW), Lennar (LEN), Paychex (PAYX), RPM International (RPM)
After the close: Amyris (AMRS), Bed Bath & Beyond (BBBY), Resources Connection (RECN)

UPCOMING ECONOMIC NEWS
Wednesday's economic reports (EST): 
MBA Mortgage Applications - 7:00am
ADP Employment Report - 8:15am

METALS / OIL
Gold closed at $1489.00 an ounce, up $16.10
Silver settled at $17.30 an ounce,  up $0.30
Copper finished at $2.56 a pound, down $0.02
Crude Oil was at $53.96 a barrel, down $0.33
Bitcoin Investment Trust (GBTC) ended at $9.90 down $0.69


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


   Todd Mitchell


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