Volatility Edges Up Ahead of Fed Decision

U.S. markets were tentative for the 2nd-straight session with the major indexes closing mostly lower on Tuesday and ahead of the Fed’s decision on interest rates on Wednesday. Expectations were for modest headway in the U.S./ China trade talks this week, but fresh chatter of President Trump’s views have constrained hopes for even incremental progress.

The President criticized China for not buying U.S. agriculture products while saying China continues to rip off the U.S. and has not delivered on promises to purchase U.S. agriculture goods. Volatility settled slightly higher but has been giving a neutral reading for 6-straight sessions while confirming the recent whipsaw action.

The S&P 500 was off 0.3% after testing a morning low just south of 3,001. Current and upper support at 3,000-2,975 held by nearly a point with a move below the latter and the mid-month low of 2,973 being a sell signal.

The Nasdaq slipped 0.2% following the opening pullback to 8,228. Current and upper support at 8,250-8,200 was breached for the 5th time in 6 sessions but a level held into the closing bell.

The Dow dipped 0.1% following the back-test to 27,069 shortly after the opening bell. The blue-chips have been in a 13-session trading range with more defined and upper support at 27,150-27,000 getting breached but holding. A close below 26,900 and the mid-month low of 26,916 would be a very bearish development for continued weakness.

The Russell 2000 recovered from a rocky open and finished the session 1.1% higher after rebounding to a peak of 1,585 ahead of the closing bell. Prior and upper resistance at 1,565-1,580 was cleared and held with the more important hurdle at the 1,600 level.

Energy led sector strength after jumping 1.1% while Real Estate and Materials were rose 1% and 0.7%, respectively.

Utilities and Consumer Discretionary fell 0.8% and 0.7% and were the leading laggards.