Market Sluggish Ahead of 3Q Earnings

U.S. markets were choppy throughout Monday’s action following reports that China was cautioning that the phase one trade agreement with the U.S. was not a deal at all, but simply represented progress toward a deal. Treasury Secretary Steve Mnuchin tried to downplay that view, acknowledging that while the deal hadn’t been fully documented and signed, he viewed it as a substantial agreement which he expects to be signed before tariffs scheduled for December take effect.

The major indexes recovered from the opening weakness and showed some intraday strength before settling lower on light volume with the the bond market being closed. Volatility fell for the 4th-straight session and is giving an ongoing bullish reading for the market after closing below a key level of support.

The Russell 2000 fell 0.4% after trading in negative territory throughout the session while tapping a morning low of 1,499. Current and upper support at 1,500-1,485 was breached but held with a move below the latter signaling additional weakness towards 1,475-1,460 and lows from earlier in the month.

The S&P 500 slipped 0.1% following the opening pullback to 2,962. Near-term and key support at 2,950 held with risk towards 2,925-2,900 and the 50-day moving average on a close back below this level.

The Dow dipped 0.1% after trading in a 125-point range while testing a 1st half low of 26,749. Current and upper support at 26,800-26,600 was breached and failed to hold with a close below the latter leading to a possible retest towards 26,400-26,200 and the 50-day moving average.

The Nasdaq also edged down 0.1%, following the intraday back-test to 8,036. Upper support at 8,050-8,000 was tripped and failed to hold with a close below the latter getting 7,975-7,925 and the 50-day moving average back in focus.

Real Estate and Financials were the only sectors winners after nudging up 0.2% and 0.1%, respectively. Materials and Utilities lead sectors losers after falling 0.7% and 0.6%, respectively.