The Week Ahead – Central Bank Chatter, Evergrande, and a Busy Economic Calendar in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 59 stats in focus in the week ending 1st October. In the week prior, 39 stats had also been in focus.

For the Dollar:

Core durable goods orders for August kicks things off on Monday.

The focus will then shift to consumer confidence figures on Tuesday. We have seen market sensitivity to consumer confidence heightened in recent months.

On Thursday, the focus will then shift to final GDP numbers for the 2nd quarter and weekly jobless claims. Barring a marked revision to the GDP numbers, expect the jobless claims to be key.

At the end of the week, inflation, personal spending, and ISM Manufacturing PMI figures will also influence.

On the monetary policy front, we will expect increased sensitivity to FOMC member chatter in the week. FED Chair Powell and a number of FOMC members are scheduled to speak in the week.

In the week ending 24th September, the Dollar Spot Index rose by 0.14% to 93.327.

For the EUR:

It’s a relatively busy week on the economic data front.

German consumer sentiment and unemployment figures will be in focus on Tuesday and Thursday.

Consumer spending from both France and Germany will also draw interest on Tuesday and Friday.

Manufacturing PMI figures for Italy and Spain, and finalized PMIs for France, Germany, and the Eurozone wrap things up on Friday.

With inflation still a key area of interest, prelim member state and Eurozone inflation figures will also influence in the week.

On the monetary policy front, ECB President Lagarde is also scheduled to speak in the week. Expect any chatter on the economic outlook or monetary policy to move the dial.

For the week, the EUR fell by 0.04% to $1.1720.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

Key stats include 2nd quarter GDP and finalized manufacturing PMIs due out on Thursday and Friday.

Expect any revision to prelim figures to influence.

On the monetary policy front, BoE Governor Bailey is due to speak on Wednesday. Following the BoE’s hawkish guidance last week, there will be plenty of interest in the Governor’s speech.

The Pound ended the week down by 0.45% to $1.3679.

For the Loonie:

It’s yet another quiet week ahead on the economic calendar.

RMPI figures will be in focus on Thursday ahead of GDP numbers on Friday.

Expect the GDP numbers to have a greater impact in the week. Much will depend on market risk sentiment, however.

The Loonie ended the week up 0.88% to C$1.2652 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet week.

Retail sales figures due out on Tuesday will be the key stat of the week. On Thursday, private sector credit figures will also influence, however.

Away from the economic calendar, updates on government plans vis-à-vis lockdown measures will also be key, however.

The Aussie Dollar ended the week down by 0.23% to $0.7262.

For the Kiwi Dollar:

It’s another quiet week ahead.

Economic data is limited to business confidence figures due out on Thursday.

With the markets looking at the impact of the latest lockdown measures, expect interest in the numbers.

Key, however, will be updates from the New Zealand government on any plans to reopen.

The Kiwi Dollar ended the week down by 0.36% to $0.7015.

For the Japanese Yen:

Industrial production and retail sales figures will draw interest on Thursday.

Of greater significance, however, will be 3rd quarter Tankan survey numbers due out on Friday.

The Japanese Yen fell by 0.73% to ¥110.97 against the U.S Dollar.

Out of China

Private sector activity is back in focus.

NBS manufacturing and non-manufacturing PMIs along with the all-important Caixin Manufacturing PMI will test market risk sentiment on Thursday.

Another set of weak numbers will likely weigh heavily on riskier assets.

The Chinese Yuan ended the week flat at CNY6.4662 against the U.S Dollar.

Geo-Politics

Iran, China, and Russia remain the main areas of interest for the markets. News updates from the China, in particular, will need monitoring following last week’s holiday.

Dow, S&P 500 end With Gains up After Bumpy Week, but Nike Drags

Athletic wear company Nike’s shares fell 6.3% and were the biggest drag on the Dow and the S&P 500 after it delivered a downbeat sales forecast and warned of delays during the holiday shopping season, blaming a supply chain crunch.

Shares of footwear retailer Foot Locker also fell sharply.

On the flip side, Facebook climbed 2% and Tesla rose 2.7%. The S&P communication services sector climbed 0.7% and was the second-biggest sector gainer of the day after energy, up 0.8%.

Stocks bounced back from a sharp selloff at the start of the week tied in part to concerns over a default by China’s Evergrande and its potential risk to global financial markets.

On Friday, Evergrande’s electric car unit warned it faced an uncertain future unless it got a swift injection of cash, the clearest sign yet that the property developer’s liquidity crisis is worsening in other parts of its business.

“You’ve had a good recovery from the lows” this week, said Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

“With rates this low – even if they are going to move up slowly – and with the fiscal stimulus you’ll probably see coming, I think investors still prefer stocks to any other asset class. Stocks remain in a weird way what investors see as the safe place.”

On Wednesday, the Federal Reserve said it would reduce its monthly bond purchases “soon” and half of the Fed’s policymakers projected borrowing costs will need to rise in 2022.

The Dow Jones Industrial Average rose 33.18 points, or 0.1%, to 34,798, the S&P 500 gained 6.5 points, or 0.15%, to 4,455.48 and the Nasdaq Composite dropped 4.55 points, or 0.03%, to 15,047.70.

For the week, the Dow was up 0.6%, the S&P 500 gained 0.5% and the Nasdaq was near flat.

Shares of cryptocurrency-related firms Coinbase Global, MicroStrategy Inc, Riot Blockchain and Marathon Patent Group fell after China’s central bank put a ban on crypto trading and mining.

“It’s been a very volatile week to say the least, so I think going into the last week of September the volatility is likely to continue especially with the end-of-the-quarter window dressing,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Investors are also looking for signs of progress on President Joe Biden’s spending and budget bills.

Declining issues outnumbered advancing ones on the NYSE by a 1.50-to-1 ratio; on Nasdaq, a 1.40-to-1 ratio favored decliners.

The S&P 500 posted 21 new 52-week highs and 6 new lows; the Nasdaq Composite recorded 82 new highs and 73 new lows.

Volume on U.S. exchanges was 9.00 billion shares, compared with the 10.11 billion average for the full session over the last 20 trading days.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch; additional reporting by Devik Jain in Bengaluru; Editing by Maju Samuel and David Gregorio)

The Weekly Wrap – Economic Data, Monetary Policy, and Evergrande Delivered a Choppy Week

The Stats

It was a quieter week on the economic calendar, in the week ending 24th September.

A total of 39 stats were monitored, which was down from 61 stats in the week prior.

Of the 39 stats, 15 came in ahead forecasts, with 23 economic indicators coming up short of forecasts. There was just 1 stat that was in line with forecasts in the week.

Looking at the numbers, 10 of the stats reflected an upward trend from previous figures. Of the remaining 29 stats, 29 reflected a deterioration from previous.

For the Greenback, monetary policy divergence delivered support in the week. In the week ending 24th September, the Dollar Spot Index rose by 0.09% to 93.281. In the previous week, the Dollar had risen by 0.66% to 93.195.

Out of the U.S

A quiet start to the week left the markets on hold ahead of Wednesday’s FOMC policy decision and projections.

Stats were limited to housing sector numbers that had a muted impact on the Dollar and beyond.

On Wednesday, the FED left policy unchanged as anticipated. The markets had expected a firm timeline on tapering, which didn’t materialize, however. While there were no fixed timelines, the projections revealed a divided camp on the interest rate front, with some pointing to rate hikes from 2022.

It was good enough to deliver Dollar support as central banks elsewhere shifted back due to the Delta variant.

On Thursday, economic data pegged back the Greenback, with the stats skewed to the negative.

In the week ending 17th September, initial jobless claims climbed from 335k to 351k.

Prelim private sector PMIs pointed to softer growth, albeit marginally.

In September, the Manufacturing PMI fell from 61.1 to 60.5, with the Services PMI declining from 55.1 to 54.4.

FED Chair Powell wrapped things up at the end of the week, with the FED Chair looking to soften market expectation of rate hikes near-term.

Out of the UK

It was a busy week.

On the economic data front, CBI Industrial Trend Orders rose from 18 to 22 in September.

The numbers had a muted impact on the Pound, however, with the BoE policy decision in focus.

Private sector PMIs came in softer in September, according to prelim figures, which pegged the Pound back.

The Manufacturing PMI fell from 60.3 to 56.3, with the Services PMI declining from 55.0 to 54.6.

In spite of weak numbers, the BoE was in action later in the day, delivering strong Pound support.

While leaving policy unchanged, the MPC noted that there was a stronger case for a rise in interest rates.

In the week, the Pound fell by 0.45% to end the week at $1.3679. In the week prior, the Pound had fallen by 0.71% to $1.3741.

The FTSE100 ended the week up by 1.26%, reversing a 0.93% loss from the previous week.

Out of the Eurozone

Private sector PMIs and German business sentiment were in focus, with the stats skewed to the negative.

In September, the French Manufacturing PMI fell from 57.5 to 55.2, with the Services PMI down from 56.3 to 56.0.

Germany’s Manufacturing PMI declined from 62.6 to 58.5, with the Services PMI falling from 60.8 to 56.0.

As a result, the Eurozone’s Manufacturing PMI fell from 61.4 to 58.7, and the Services PMI down from 59.0 to 56.3.

Germany’s IFO Business Climate Index fell from 99.6 to 98.8, with the Current Assessment sub-index down from 101.4 to 100.4. The Business Expectations sub-index declined from 97.5 to 97.3.

For the week, the EUR slipped by 0.04% to $1.1720. In the week prior, the EUR had fallen by 0.75% to $1.1725.

The CAC40 rallied by 1.04%, with the DAX30 and the EuroStoxx600 ending the week with up by 0.27% and 0.31% respectively.

For the Loonie

Retail sales were in focus in the 2nd half of the week.

In July, core retail sales fell by 1.0%, with retail sales down 0.6%. Core retail sales had risen by 4.7% in June, with retail sales having increased by 4.2%.

While the stats were Loonie negative, rising oil prices delivered support.

In the week ending 24th September, the Loonie rose by 0.88% to C$1.2752. In the week prior, the Loonie had fallen by 0.57% to C$1.2764.

Elsewhere

It was yet another bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar fell by 0.45% to $0.7262, with the Kiwi Dollar ending the week down by 0.36% to $0.7015.

For the Aussie Dollar

There were no material stats to provide direction, leaving the RBA meeting minutes in focus.

Renewed lockdown measures supported the RBA’s view that there would be no rate hike until 2024.

The minutes did note, however, that the Delta variant impact was likely to be temporary, however.

For the Kiwi Dollar

Consumer sentiment and trade data were in focus, with the stats Kiwi Dollar negative.

In the 3rd quarter, the Westpac Consumer Sentiment Index fell from 107.1 to 102.7. While down, the decline was modest when compared with the impact of the first lockdown on sentiment.

A surge in imports led to a record trade deficit in August.

Month-on-month, the trade deficit widened from NZ$397m to NZ$2,144m. Compared with August 2020, the deficit widened from NZ$1,100m to $2,940m.

For the Japanese Yen

In August, core consumer prices were unchanged, year-on-year, after having fallen by 0.2% in July.

Service sector activity saw a softer contraction in September, which was also good news. The Services PMI rose from 43.5 to 47.4. Manufacturing sector activity did see slower growth, however, with the PMI falling from 52.7 to 51.2.

On the monetary policy front, the BoJ went largely unnoticed, with the September hold on monetary policy.

The Japanese Yen fell by 0.73% to ¥110.73 against the U.S Dollar. In the week prior, the Yen had risen by 0.01% to ¥109.93.

Out of China

There were no major stats in a shortened week.

On the policy front, the PBoC left loan prime rates unchanged, which was in line with expectations.

In the week ending 24th September, the Chinese Yuan was unchanged at CNY6.4662. In the week prior, the Yuan had ended the week down by 0.34% to CNY6.4661.

The CSI300 and the Hang Seng ended the week down by 0.13% and by 2.92% respectively.

Europe Shares Fall, Wall St Pauses as Evergrande Fears Hover; U.S. Yields Rise

MSCI’s gauge of stocks across the globe shed 0.20% after three days of gains, leaving it little changed for the week.

Concern over whether distress at Evergrande could spill into the broader economy has hovered over markets this week. Evergrande’s electric car unit warned it faced an uncertain future unless it got a swift injection of cash, the clearest sign yet that the property developer’s liquidity crisis is worsening in other parts of its business.

“You look back on this week and there is a lot for global markets to digest,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.

“There is still not clarity on how China will address the cracks in their credit markets.”

On Wall Street, the Dow Jones Industrial Average fell 4.97 points, or 0.01%, to 34,759.85, the S&P 500 gained 1.89 points, or 0.04%, to 4,450.87 and the Nasdaq Composite dropped 22.91 points, or 0.15%, to 15,029.34.

Gains in S&P 500 cyclical sectors such as financials and energy countered declines for the tech and healthcare groups.

The pan-European STOXX 600 index lost 0.90% as weak German business confidence data also weighed.

“Some of the hesitancy in European markets could also be put down to the German elections, which promise to be the most interesting in some time,” said Chris Beauchamp, chief market analyst at IG.

Investors were also assessing a busy week of central bank meetings around the world, including arguably more hawkish stances from the U.S. Federal Reserve, as well as from policymakers in Britain and Norway.

Yields on benchmark U.S. 10-year Treasury notes hit their highest level since July 2. The notes fell 13/32 in price to yield 1.4526%, from 1.41% late on Thursday.

“A week of central bank action has shown us that policymakers are ready to move toward reining in on loose monetary policies introduced during the pandemic,” ING analysts wrote in a note to clients.

The dollar index rose 0.22% and was on track for a third straight week of gains, with the euro down 0.19% to $1.1714. The Japanese yen weakened 0.39% versus the greenback at 110.75 per dollar.

Oil prices rose, with Brent up to a near three-year high, supported by global output disruptions and inventory draws.

U.S. crude rose 0.93% to $73.98 per barrel and Brent was at $77.97, up 0.93% on the day.

Spot gold added 0.5% to $1,750.92 an ounce.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Anushka Trivedi, Sruthi Shankar and Shreyashi Sanyal in Bengaluru, Alun John in Hong Kong, Dhara Ranasinghe, Elizabeth Howcroft and Marc Jones in London; Editing by Robert Birsel, Chizu Nomiyama, Andrew Heavens and Dan Grebler)

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Strong Over 34655, Weak Under 34431

December E-mini Dow Jones Industrial Average futures are edging lower in the pre-market session on Friday, one day after posting a more than 1% gain. The price action suggests the move was fueled by value-seeking buyers who may have been expressing relief about the Federal Reserve’s stance on tapering stimulus and raising interest rates.

At 05:35 GMT, December E-mini Dow Jones Industrial Average futures are trading 34621, down 23 or -0.07%.

Investors also returned to the market as concerns eased further over a potential default by Chinese property developer Evergrande even as Reuters reported that some holders of the firm’s dollar bonds had given up hope of getting a coupon payment by a key Thursday deadline.

In stock related news, shares of IT services provider Salesforce finished up 7.21% and the company was a big boost to the Dow during the session after it raised its annual earnings forecast.

Daily December E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 33478 will signal a resumption of the downtrend. A move through 35383 will change the main trend to up.

The minor trend is also down. A trade through 34826 will change the minor trend to up. This will shift momentum to the upside.

The main range is 32835 to 35429. Its retracement zone at 34132 to 33826 is a potential support area.

The short-term range is 35383 to 33478. The market is currently testing its retracement zone at 34431 to 34655. Trader reaction to this zone will determined the near-term direction of the E-mini Dow.

Daily Swing Chart Technical Forecast

The direction of the December E-mini Dow Jones Industrial Average on Friday is likely to be determined by trader reaction to 34655.

Bullish Scenario

A sustained move over 34655 will indicate the presence of buyers. Taking out the minor top at 34826 will change the minor trend to up and shift momentum to the upside. This could extend the rally into a pair of minor tops at 34907 and 35076. The latter is the last potential resistance before the main top at 35383 and the record high at 35429.

Bearish Scenario

A sustained move under 34655 will signal the presence of sellers. This could trigger a break into the 50% level at 34431.

We could see a technical bounce on the first test of 34431, but if it fails then we could see a retest of the main retracement zone at 34132 to 33826.

For a look at all of today’s economic events, check out our economic calendar.

Indexes Close Higher as Investors Assess Fed News

Upbeat outlooks from Accenture and Salesforce helped to bolster the market, while the U.S. Food and Drug Administration late Wednesday authorized a booster dose of the Pfizer-BioNTech COVID-19 vaccine for those 65 and older.

Also helping sentiment, concern about a ripple effect from China Evergrande continued to ease.

The Fed said on Wednesday it could begin reducing its monthly bond purchases by as soon as November, and that interest rates could rise quicker than expected by next year. The November deadline was largely priced in by markets.

In a press conference after the statement, Fed Chair Jerome Powell said the bar for lifting rates from zero is much higher than for tapering.

“This is a follow-on rally from a very good Fed meeting,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

“To me that showed there were no surprises and things were as expected,” he said. “Any Fed rate hike is still quite a ways off and so much can change between now and then.”

Energy and financial stocks were the S&P sectors gaining most ground.

Unofficially, the Dow Jones Industrial Average rose 502.55 points, or 1.47%, to 34,760.87, the S&P 500 gained 52.84 points, or 1.20%, to 4,448.48 and the Nasdaq Composite added 151.28 points, or 1.02%, to 15,048.13.

Shares of IT services provider Salesforce jumped and the company was a big boost to the S&P and the Dow during the session after it raised its annual earnings forecast.

Accenture gained after the IT consulting firm boosted its first-quarter outlook.

Concerns eased further over a potential default by Chinese property developer Evergrande even as Reuters reported that some holders of the firm’s dollar bonds had given up hope of getting a coupon payment by a key Thursday deadline.

Investors shrugged off data showing sluggish business activity growth and a rise in jobless claims, in line with expectations for a slowdown in economic growth in the third quarter.

During the session the S&P 500 broke above its 50-day moving average, after trading below the indicator for three full sessions – its biggest such breach since early March.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch in New York; Additional reporting by Ambar Warrick in Bengaluru; Editing by Maju Samuel and Lisa Shumaker)

Stocks Surge, Dollar Sags as Investor Risk Appetite Expands

Wall Street’s S&P 500 surged well over 1% following solid gains for European markets.

MSCI’s gauge of stocks across the globe jumped 1.06%. As it gained for a third session, the index had recovered all its losses from Monday, when it posted its biggest percentage drop in two months.

Safe-haven trades faded after benefiting earlier in the week, with gold prices dropping.

“We are seeing markets rally on the premise that while the situation in China particularly with Evergrande is not going away, the outcome is not perhaps going to be as severe or prompt some form of contagion that was originally feared,” said Craig Fehr, investment strategist at Edward Jones.

“You combine that with the fact that the tone that the Fed struck yesterday at its meeting suggests that while a reduction in stimulus is certainly coming, the Fed is not particularly eager to start tightening policy dramatically in the near term.”

The Fed said on Wednesday it will likely begin reducing its monthly bond purchases as soon as November and signalled interest rate increases may follow more quickly than expected as the U.S. central bank’s turn from pandemic crisis policies gains momentum.

In Hong Kong, shares of debt-laden property group Evergrande jumped 18% ahead of a key debt payment deadline. Fears the group’s distress could spill into the broad economy helped spark an equity sell-off to start the week.

On Wall Street, the Dow Jones Industrial Average rose 544.68 points, or 1.59%, to 34,803, the S&P 500 gained 59.11 points, or 1.34%, to 4,454.75 and the Nasdaq Composite added 146.28 points, or 0.98%, to 15,043.13.

The pan-European STOXX 600 index rose 0.93%.

Norway’s central bank raised its benchmark interest rate and said it expects to hike again in December, joining a short but growing list of nations moving away from emergency-level borrowing costs. Norway’s crown strengthened to its highest level since mid-June versus the euro.

In other currency trading, the dollar index fell 0.492% after hitting a one-month high earlier, with the euro up 0.49% to $1.1743. The Japanese yen weakened 0.34% versus the greenback at 110.15 per dollar.

Sterling was last trading at $1.3743, up 0.87% on the day, after the Bank of England said two of its policymakers had voted for an early end to pandemic-era government bond buying and markets brought forward their expectations of an interest rate rise to March.

Benchmark 10-year notes last fell 21/32 in price to yield 1.401%, from 1.331% late on Wednesday. Key Euro area bond yields also climbed after the hawkish signals from major central banks.

Oil prices rose, supported by growing fuel demand and a draw in U.S. crude inventories as production remained hampered in the Gulf of Mexico after two hurricanes.

U.S. crude gained 1.59% to $73.38 per barrel and Brent was at $77.25, up 1.39% on the day.

Spot gold dropped 1% to $1,749.66 an ounce.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Sujata Rao in London and Alun John in Hong Kong; Editing by Hugh Lawson, Alex Richardson, Steve Orlofsky and Catherine Evans)

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Big Challenge for Bulls at 33431 – 34655

December E-mini Dow Jones Industrial Average futures bounced back from recent losses on Wednesday and are now poised to complete their best day in two months as concerns over a default by China’s Evergrande eased.

The blue chip average was also supported by the news that the U.S. House of Representatives passed a bill Tuesday that would temporarily fund the government and suspend the debt limit.

At 20:40 GMT, December E-mini Dow Jones Industrial Average futures are trading 34152, up 354 or +1.05%.

In other news, the Dow held on to its gains late in the session on Wednesday after the U.S. Federal Reserve kept benchmark interest rates anchored near zero. Investors weren’t rattled either when Federal Open Market Committee (FOMC) members indicated they expect to begin reducing monthly asset purchases “soon,” but did not say when.

In his press conference, Federal Reserve Chairman Jerome Powell summarized the days’ events by saying, “While no decisions were made, participants generally viewed that so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate,” he said.

Daily December E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 33478 will signal a resumption of the downtrend. A move through 35383 will change the main trend to up. This is highly unlikely, but there is room for a normal 50% to 61.8% retracement of its recent sell-off.

The main range is 32835 to 35429. The E-mini Dow has been straddling its retracement zone at 34132 to 33826 for three days in an effort to form a support base.

The minor range is also down. A trade through 34826 will change the minor trend to up. This will also shift momentum to the upside.

The short-term range is 35383 to 33478. Its retracement zone at 34431 to 34655 is the primary upside target.

Short-Term Outlook

Our short-term analysis suggests the December E-mini Dow could develop a counter-trend upside bias as long at 34132 to 33826 holds as support. The primarily upside target is 34431 to 34655.

Trader reaction to 34431 to 34655 will be very important in determining the near-term direction of the E-mini Dow.

Since the main trend is down, sellers are going to come in to defend the trend on a test of 34431 to 34655. They are going to try to produce a potentially bearish secondary lower top. If successful, we should see a retest of 34132 to 33826.

If 33826 fails a second time this week then look for a potential acceleration to the downside with 32835 the next target this time.

If buyers can overcome 34655 with conviction then look for a potential acceleration to the upside with possible stops at 34826 and 35076 along the way.

Essentially, trader reaction to 33431 to 34655 will set the tone into at least Friday’s close.

For a look at all of today’s economic events, check out our economic calendar.

Wall St Ends Higher as Fed Signals Bond-Buying Taper Soon

Trading was choppy, however, following the Fed’s latest policy statement, in which the central bank also suggested interest rate increases may follow more quickly than expected.

Overall indicators in the economy “have continued to strengthen,” the Fed said.

Bank shares rose following the news.

Stocks were already sharply higher before the statement from the Fed, with stocks bouncing back as concerns eased over a default by China’s Evergrande.

Strategists said what eventually happens with tightening may be less hawkish than some expect.

“I don’t think the Fed’s tightening is going to be anywhere near as hawkish as they anticipate. It’s going to be hard for them to execute on this plan as the economy slows next year,” said Joseph LaVorgna, Americas chief economist at Natixis in New York.

Unofficially, the Dow Jones Industrial Average rose 341.11 points, or 1.01%, to 34,260.95, the S&P 500 gained 41.54 points, or 0.95%, to 4,395.73 and the Nasdaq Composite added 150.45 points, or 1.02%, to 14,896.85.

Evergrande’s main unit said it had negotiated a deal with bondholders to settle interest payments on a domestic bond, calming fears of an imminent default that could unleash global financial chaos.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevithc; additional reporting by Ambar Warrick and Medha Singh in Bengaluru; Editing by Maju Samuel and Lisa Shumaker)

Stocks Hold Gains, Dollar Strengthens After Fed Flags Taper Soon

Asset price moves were volatile following the Fed’s latest policy statement, in which the central bank also signaled interest rate increases may follow more quickly than expected.

“It’s probably a little bit more hawkish than many would have anticipated basically acknowledging that should the economy continue to grow as we have seen it would warrant a tapering to occur,” said Sam Stovall, chief investment strategist at CFRA Research in New York.

Stocks had been stronger earlier in the session, as investors already were scooping up equities as market jitters around property developer China Evergrande eased.

Evergrande agreed to settle interest payments on a domestic bond, while the Chinese central bank injected cash into the banking system, soothing fears of imminent contagion from the debt-laden property developer that had pressured equities and other riskier assets at the start of the week.

MSCI’s gauge of stocks across the globe gained 0.65%, bouncing back for a second day after it logged its biggest one-day percentage drop in two months on Monday.

On Wall Street, the Dow Jones Industrial Average rose 382.01 points, or 1.13%, to 34,301.85, the S&P 500 gained 42.06 points, or 0.97%, to 4,396.25 and the Nasdaq Composite added 125.46 points, or 0.85%, to 14,871.86.

The pan-European STOXX 600 index rose 0.99%.

In currency trading, the dollar index rose 0.132%, with the euro down 0.13% to $1.1708.

Benchmark U.S. 10-year notes last fell 1/32 in price to yield 1.3277%, from 1.324% late on Tuesday.

Oil prices climbed after U.S. crude stocks fell to their lowest levels in three years as refining activity recovered from recent storms.

U.S. crude rose 2.26% to $72.08 per barrel and Brent was at $76.05, up 2.27% on the day.

Spot gold dropped 0.2% to $1,770.30 an ounce.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Tom Wilson in London; additional reporting by Sinead Carew and Stephen Culp in New York, Tom Westbrook in Singapore and Anushka Trivedi in Bengaluru; editing by Sam Holmes and Alistair Bell)

Top Three Ways To Hedge With Options

Ok, so we have FOMC Wednesday, September 22.  What do we do and what can we expect?  First, let me start by saying I don’t think the FED will say anything that will be earth-shattering.  They already pushed the dreaded tapering off until Nov and they will probably use the transitory term to lighten the concerns of inflation, the US, and world economies (think of China).  I also think they will point to better-than-expected inflation numbers and how things were not as bad as projected.  SO what is one to do?

If you are a stock trader chances are you may still have considerable risk on the table.  With the recent semi-market meltdown (Note the markets only fell about 5% since the market high about 2 weeks ago) there may be traders stuck in long positions.

So this begs the question.  What do you do?  Are you sucked down into oblivion with the impending black swan?  Do you cut your losses now and get out and hide?  Or do you try to find a way to protect yourself and minimize your losses?  If you are like me you never like to lose and I am one to never throw in the towel.  If this is you then you can “leverage” options to hedge.  The problem here is most do not understand how to hedge with options.  So here are some “options” on how to use options to hedge.

  1. Use the VIX!  We have all heard this before but the cold truth is many do not understand volatility nor how to hedge with the VIX.  The best way is to use the actual VIX not the spin-off derivative products like UVXY and VXX.  What I do is I will buy a debit spread 6 months out and then finance it by selling a put credit spread.  Yes, this is a 4 leg custom position but usually, if you do this right you can do this for little to no cost and sometimes for a small credit.
  2. Use BackRatio spreads!  Most have NO idea what this is or how they work.  If you are that person check out our service we do these all the time.  You essentially sell an ATM option and then buy two OTM options but to the downside.  The key here is you can do BackRatios to the upside but when volatility crushes (you are a net buyer in this spread) you get sucked into what I call the negative valley of death.  The reverse is true to the downside.  As the underlying goes down volatility rises and thus this expansion helps your positions (because we are net buyers).
  3. Break up your options positions if you are in spreads.  Get out of positions when they are favorable for that part of your spread think the legs of an iron condor.  Or you can roll the unchallenged leg of the iron condor.  You can break up butterflies and sell the profitable parts then when the stock reverses for a day you get out of the other side without the boat anchor pulling you down.

Every day on  Options Trading Signals we do defined risk trades that protect us from black swan events 24/7.  Many may think that is what stop losses are for.  Well, remember the markets are only open about 1/3 of the hours in a day.  Therefore, a stop loss only protects you for 1/3 of each day.  Stocks can gap up or down.  With options, you are always protected because we do defined risk in a spread.  We cover with multiple legs which are always on once you own.

For a look at all of today’s economic events, check out our economic calendar.

Enjoy your day!

Chris Vermeulen
Founder & Chief Market Strategist
www.TheTechnicalTraders.com

 

S&P500 – Expect Volatility Upon FOMC Release

The S&P 500 index fell the lowest since July 20 on Monday, as it reached the daily low of 4,305.91. It was 239.9 points or 5.28% below the September 2 record high of 4,545.85. We’ve witnessed an intraday rebound as the market closed around 52 points above the daily low. And on Tuesday it got back to the 4,400 price level before closing 0.08% lower, at 4,354.19.

The nearest important support level of the broad stock market index is now at 4,300-4,330 and the next support level is at 4,200. On the other hand, the nearest important resistance level is now at 4,400-4,450, marked by the previous support level. The S&P 500 broke below its over four-month-long upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Medium-Term Downward Reversal or Just a Correction?

The S&P 500 index broke below its medium-term upward trend line a few weeks ago. On Monday it fell to the nearest important support level is of 4,300, as we can see on the weekly chart:

Dow Jones Remains Relatively Weak

Let’s take a look at the Dow Jones Industrial Average chart. In early September the blue-chip index broke below a two-month-long rising wedge downward reversal pattern. It remained relatively weaker in August – September, as it didn’t reach new record high like the S&P 500 and the Nasdaq. And on Monday it fell below its July local low of around 33,740 before bouncing back to the 34,000 mark. The resistance level is now at 34,000-34,500, and the support level remains at around 33,500, as we can see on the daily chart:

Apple Is At the Previous Local lows

Apple stock weighs around 6.3% in the S&P 500 index, so it is important for the whole broad stock market picture. In early September it reached a new record high of $157.26. And since then it has been declining. So it looked like a bull trap trading action. On Monday the stock sold off to the previous local lows along $142 price level. They act as a support level. On the other hand, the resistance level is at around $145-146, marked by the recent local lows.

Conclusion

On Monday, the S&P 500 index accelerated the downtrend from the early September record high and yesterday it bounced to the 4,400 price level before closing virtually flat. It looked like a short-covering rally and a short-term upward correction. Today, we will have the important FOMC release at 2:00 p.m. We will likely see an increased volatility and the index may fluctuate within its Monday’s daily trading range.

There have been no confirmed positive signals so far. Therefore, we think that the short position is justified from the risk/reward perspective.

Here’s the breakdown:

  • The market accelerated its downtrend on Monday, as the S&P 500 index got close to 4,300 level.
  • Our speculative short position is still justified from the risk/reward perspective.
  • We are expecting some more downward pressure and a correction to 4,200-4,250 level.

Like what you’ve read? Subscribe for our daily newsletter today, and you’ll get 7 days of FREE access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care

* * * * *

The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Did The Global Markets Rollover In April/May 2021? What Next? Part II

Although the US markets continued to trend higher after that peak, the global markets, as well as a number of key indicators, suggested the bullish price trend had reached a peak and started to weaken after the April/May 2021 peak.

My assumption is this data shows the markets entered a highly speculative phase of trading after the November 2020 elections. History shows us that the 12+ months prior to a US Presidential election are usually filled with uncertainty and sideways market volatility. Then, just after the US Presidential election is completed, the markets usually enter into a trending phase related to the expectations and promises of the newly elected US President. 2020 was no different in this process. What was different was the fact that the US Federal Reserve was still pouring trillions into supporting the post-COVID global economic recovery. So this post US Presidential election rally may have become a super-charged speculative rally phase with the US Fed backing the trends.

The one key chart this highlights the April/May 2021 peak is the Weekly NYSE New Highs. The data on this chart suggests the NYSE moved into a period of hyper-bullish trending near the end of 2020 and continued to push to extreme highs in April/May 2021. After the peak level on this chart, in early May 2021, the NYSE new highs collapsed by more than 80% in less than 15 days. This represents an incredible reversal of sentiment for traders/investors at a time when the US stock market had just completed Q1:2021 earnings updates. Almost as if traders/investors decided “that’s it, the party’s over.” and started pulling assets away from the markets to protect profits.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/09/NYSE_NewHighs_W_F.png

In the first part of this research article, we suggested reviewing a few of our earlier research posts to get a better understand of how this market trend set up. I’ll share them here:

  • November 27, 2020: HOW TO SPOT THE END OF AN EXCESS PHASE – PART II
  • May 20, 2021: BITCOIN COMPLETES PHASE #3 OF EXCESS PHASE TOP PATTERN – WHAT NEXT?
  • May 23, 2021: US DOLLAR BREAKS BELOW 90 – CONTINUE TO CONFIRM DEPRECIATION CYCLE PHASE

Most importantly, this research article highlights the transition into the new Depreciation Price Cycle and the fact that it should last until 2029 to 2031.

Moving onto current market charts and setups, we want to focus your attention on the IWP, Russell Midcap Growth ETF, Weekly chart, and the weakening market trend and price pattern that was set up recently. Not only are we seeing very weak volume in a bullish price trend pushing to new all-time highs, but we are also seeing a divergence between price and the RSI indicator suggesting this current peak is actually setting up as a potential FINAL peak in trend.

The Russell MidCap Growth ETF is uniquely positioned to reflect moderate price trending, potentially before the S&P or NASDAQ, because it reflects a broad swath of the market in terms of types of companies and a variety of industries/services. Watching the setups in the MidCaps and/or the Russell 2000 can often provide insight to major market trends and setups that are not evident in the NASDAQ or S&P 500. This is because many traders focus assets and perceptions into the US major indexes at a greater scale – often ignoring what is taking place in the Russell 2000 or the Russell Midcap Growth ETF. Therefore, we can often see a different perspective by watching these outlier symbols and price setups.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/09/IWP_MidCap_W_F.png

Our Custom Smart Cash Index Weekly chart presents a very clear image of the peak in April/Pay 2021 and also presents a very clear downside price rotation in the US/Global markets after that peak. We’ve drawn a BLUE LINE showing the April/May peak and a RED ARROW showing how this Custom Smart Cash Index has declined over the past 5+ months. The strength of the decline in price on this chart seems completely opposite to the rally on the IWP chart (above). How could the US/Global markets be representing moderate price weakness on the Custom Smart Cash Index chart, while still showing moderate bullish price trending on the IWP chart?

My interpretation of these two charts, in combination with the chart I shared in the first part of this research article, suggests the US and global markets were diverging in trend. While the US markets continued to push higher and higher, as traders continued to chase the bullish price expectations related to US economic strength and recovery, the global markets and the internal dynamics of this bullish price trend had completely diverged from the trends we were seeing in the US major indexes. Almost like the momentum of a slowing train – the US markets continued to trend higher while the true momentum of the markets showed a downward price trend was already taking place.

At some point in the near future, this diverging price trend is going to push the US markets lower or the global markets will find eventual support and attempt to climb higher. This divergence suggests the US markets were acting in a manner that is counter to the global market trends – which was likely the result of the US Federal Reserve continuing to support the markets with asset-buying programs and expectations the US government would step into ease COVID related economic concerns.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/09/SmartCash_W_F.png

The reality of the current market environment is that these continued US Federal Reserve and US Government efforts to support the US economy can’t and won’t last forever. Eventually, the US and global markets need to function on real economic data and processes. The end of the extreme support efforts will likely cause the markets to revert towards more true valuation levels and potentially prompt a breakdown in this extended bullish price trend.

I’ve warned about this many times over the past few months with various research articles and my expectations that a post-COVID diminishing Sine Wave structure would present a rolling, sometimes volatile, series of future economic data points throughout the world. As the markets attempt to return to normal economic functions, excessive credit and debt within the global markets will become an issue.

Rolling economic data points will present some very interesting and concerning forward guidance for traders and investors. We’ve seen incredibly positive economic data points over the past 5+ months because of the COVID-19 collapse in the global economy. These extreme rally higher will certainly be followed by a reversion process over the next few months. Eventually, the global markets will be forced to transition to more normal market dynamic processes – which may represent a moderately large price reversion event in the near future.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/09/CovidSineStructre.png

As a technical trader, I love being able to share these unique and informative research articles with you. I see the markets continuing to have extended volatility over the next 24+ months with the potential for big rallies and pullbacks taking place. As much as that may scare some people, I see it as an incredible opportunity for big profits.

Big trends and increased volatility in a post-COVID normalization of the global economy are going to allow the markets to revalue and restore assets in a way that will provide an incredible growth phase for the markets (eventually). As I’ve explained in previous articles, the COVID-19 disruption was a major disruption to the global market economic process. It was big and disrupted nearly every economy on the planet. Now, in a post-COVID world, the markets will digest the extreme stimulus and support that has pushed most indexes higher over time and revert back to more normal economic functions. Eventually, all of this new capitalization and support will settle into proper economic purpose – driving a massive growth of global GDP (much like what happened after WWII). When we get to that point, we should see a massive growth phase in the global markets that may last 15+ years or more.

Please take a minute to learn about my BAN Trader Pro newsletter service and how it can help you identify and trade better sector setups.  My team and I have built this strategy to help us identify the strongest and best trade setups in any market sector.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

As something entirely new, check out my initiative URLYstart to learn more about the youth entrepreneurship program I am developing. This is an online program of gamified entrepreneurship designed to introduce and inspire youth to start their own businesses. Click-by-click, each student will be guided from their initial idea, through the startup process all the way to their first sale and beyond. Along the way, our students will learn life lessons such as communication, perseverance, goal setting, teamwork, and more. My team and I are passionate about this project and want to reach as many people as possible!

Have a great day!

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategist

 

Wall Street Ends Near Flat on Cautious Note Ahead of Fed

Concerns over China Evergrande Group have put investors on edge amid coronavirus and economic growth worries.

Persistent default fears overshadowed efforts by Evergrande’s chairman to boost confidence in the firm on Tuesday, while Beijing showed no signs it would intervene to stem any effects across the global economy.

“People have been preconditioned to buy pullbacks for most of the last year plus,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

“But that overhead nervousness is still there,” he said. “The Evergrande situation is still a black cloud hanging over global markets. Combine that with uncertainty with Fed commentary coming tomorrow, and there’s a reluctance to get overly aggressive on the long side.”

Investors are waiting for the end of this week’s Fed meeting that may shed light on when its massive purchase of government debt will begin to ease.

Officials will reveal new projections as investors also are on alert for any timing on rate tightening.

Unofficially, the Dow Jones Industrial Average fell 47.93 points, or 0.14%, to 33,922.54, the S&P 500 lost 3.58 points, or 0.08%, to 4,354.15 and the Nasdaq Composite added 32.50 points, or 0.22%, to 14,746.40.

The S&P 500 index traded below its 50-day moving average, its first major breach in more than six months. The average has served as a floor of sorts for the index this year.

Analysts say a breach of the index’s 200-day moving average is now in sight.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch; additional reporting by Sagarika Jaisinghani and Ambar Warrick in Bengaluru; Editing by Anil D’Silva and Lisa Shumaker)

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Strong Over 34132, Weak Under 33826

December E-mini Dow Jones Industrial Average futures are trading higher during the pre-market session early Tuesday as investors attempt to claw back yesterday’s steep loss.

The blue chip average tumbled on Monday due to a confluence of concerns including the imminent Federal Reserve meeting, the lingering delta variant, potential economic disruption in China and the debt ceiling deadline, CNBC wrote.

At 06:36 GMT, December E-mini Dow Jones Industrial Average futures are at 34096, up 257 or +0.76%.

In the cash market on Monday, the Dow Jones Industrial Average plummeted 614 points, or 1.8%, for its biggest one-day drop since July 19.

Financial-related stocks were particularly weak with Goldman Sachs Group Inc down 3.41%. JPMorgan Chase & Co lost 2.99% and Travelers Companies Inc was off by 2.32%.

Daily December E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 33478 will signal a resumption of the downtrend. A move through 35383 will change the main trend to up. This is highly unlikely but there is room for a normal 50% to 61.8% retracement.

The minor trend is also down. It will change to up on a trade through 34826. This will also shift momentum to the upside.

The main range is 32835 to 35429. The E-mini Dow is currently trading inside its retracement zone at 34132 to 33826. Trader reaction to this zone is likely to determine the tone of the market the rest of the week.

The short-term range is 35383 to 33478. Its retracement zone at 33431 to 34655 is the next upside target area.

Daily Swing Chart Technical Forecast

The direction of the December E-mini Dow Jones Industrial Average early Tuesday is likely to be determined by trader reaction to 33826.

Bullish Scenario

A sustained move over the Fibonacci level at 33826 will indicate the presence of buyers. The first upside target is the 50% level at 34132.

Since the main trend is down, sellers are likely to come in on the first test of 34132. Overtaking this level will indicate the buying is getting stronger. If this generates enough upside momentum then look for a surge into the retracement zone at 34431 to 34655. Look for sellers to return on a test of this area.

Bearish Scenario

The inability to overcome 34132 will be the first sign of selling pressure. Taking out 33826 will indicate the selling pressure is getting stronger. This could trigger a retest of yesterday’s low at 33478. This price level is a potential trigger point for an acceleration to the downside with the June 21 main bottom at 32835 the next major downside target.

For a look at all of today’s economic events, check out our economic calendar.

Gold Recovers as Worldwide Equites Sell Off

The worldwide equity selloff began overseas and then continued into the U.S. equities markets. At its low today the Dow Jones industrial average was down 900 points before recovering. The Dow gave up 614 points in trading today and closed at 33,970.47, resulting in a net decline of 1.78%. The NASDAQ composite lost 2.19% and is currently fixed at 14,713.9030. The S&P 500 lost 1.70% and is currently fixed at 4357.73.

gold sept 20

As of 5:56 PM EDT gold futures basis, the most active December 2021 contract is currently up to $13.30 and fixed at $1764.70. Silver did sustain a mild selloff closing lower by 0.41%, and after factoring in today’s decline of a little over nine cents, it is currently fixed at $22.245.

silver sept 20

Reuters reported that “Wall Street plunged on Monday as fear of contagion from a potential collapse of China’s Evergrande prompted a broad selloff and sent investors fleeing equities for safety.”

They also added that “the equity selloff in the United States was a result of concerns of solvency of the Chinese property group Evergrande. “Gold rose on Monday as fears about the solvency of Chinese property group Evergrande sparked a flight to safe-haven assets, but gains were capped by strength in the dollar ahead of the U.S. Federal Reserve’s policy meeting. Spot gold rose 0.5% to $1,762.66 per ounce by 1753 GMT. U.S. gold futures settled 0.8% higher at $1,765.40.”

The Chinese property to developers has accumulated over $300 billion in debt mostly with the Central Bank of China.

The Federal Reserve will meet tomorrow and begin September’s FOMC meeting, which will conclude on Wednesday. Market participants and traders hope to gain more clarity as to the timeline in which the Federal Reserve will begin to taper their monthly asset purchases of $120 billion (80 billion in U.S. debt and 40 billion in mortgage-backed securities).

There is genuine uncertainty as to what actions the Federal Reserve will take in regards to their current monthly asset purchases. Their asset balance sheet has swelled to above $8 trillion in assets. However, their primary focus has been upon maximum employment, a major component of their dual mandate which is maximum employment and annual inflationary levels of around 2%. They have let inflation run much hotter in lieu of achieving their maximum employment goal. Believing that the majority of the current level of inflation is transitory, the Federal Reserve has let inflation run to 5.3%, based upon the latest CPI numbers released last week.

However, the most recent jobs report was extremely disappointing and deeply below expectations and forecasts from economists polled by the Wall Street Journal. The expectation was that the August jobs report would indicate an additional 700,000+ new jobs added to payrolls, and the actual number was a tepid 235,000 new jobs added last month.

The weak August jobs report will be weighed against the most recent report by the U.S. Census Bureau, which indicated robust consumer spending last month, resulting in $618 billion, up 0.8%. Economists polled were looking for August consumer spending to be down between -0.8 to -1.8. If you strip out consumer spending on automobiles and trucks, the actual gain for the month of August is 1.8%.

These two reports show an interesting mix between new jobs added and consumer spending. While the jobs report was disappointing and weak at best, consumer spending rose far past the expectations given by economists. Therefore, the Federal Reserve will be faced with making a decision based on strong consumer spending and weak growth in jobs. That will certainly influence their decision as to when they will begin to taper.

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

 

Wall Street Ends Sharply Lower in Broad Sell-Off

The Nasdaq fell to its lowest level in about a month, and Microsoft Corp, Alphabet Inc, Amazon.com Inc, Apple Inc, Facebook Inc and Tesla Inc were among the biggest drags on the index as well as the S&P 500.

All 11 major S&P 500 sectors were lower, with economically sensitive groups like energy down the most.

Investors also were nervous ahead of the Federal Reserve’s policy meeting this week.

The banking sub-index dropped sharply while U.S. Treasury prices rose as worries about the possible default of Evergrande appeared to affect the broader market.

“You kind of knew that when there was something that caught markets off guard, that it was going to lead to probably a bigger sell-off and you didn’t know what the reason would be,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.

“I guess it’s the China news but… it’s not altogether surprising given how bullish people were.”

Wednesday will bring the results of the Fed’s policy meeting, where the central bank is expected to lay the groundwork for a tapering, although the consensus is for an actual announcement to be delayed until the November or December meetings.

Unofficially, the Dow Jones Industrial Average fell 620.22 points, or 1.79%, to 33,964.66, the S&P 500 lost 75.28 points, or 1.70%, to 4,357.71 and the Nasdaq Composite dropped 325.95 points, or 2.17%, to 14,718.02.

The S&P 500 is down sharply from its intra-day record high hit on Sept. 2 and is on track to snap a seven-month winning streak.

Strategists at Morgan Stanley said they expected a 10% correction in the S&P 500 as the Fed starts to unwind its monetary support, adding that signs of stalling economic growth could deepen it to 20%.

The CBOE volatility index, known as Wall Street’s fear gauge, rose.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch in New York; additional reporting by Devik Jain and Sagarika Jaisinghani in Bengaluru and by Noel Randewich in San Francisco; Editing by Sriraj Kalluvila and Lisa Shumaker)

World Shares Tumble as China Evergrande Contagion Fears Spread

MSCI’s gauge of stocks across the globe shed 2.09%, on pace for its biggest one-day fall since October 2020, as Wall Street’s major indexes sagged more than 2%.

Investors moved into safe havens, with U.S. Treasuries gaining in price, pulling down yields, and gold rising.

Shares in Evergrande, which has been scrambling to raise funds to pay its many lenders, suppliers and investors, closed down 10.2% at HK$2.28.

Regulators have warned that its $305 billion of liabilities could spark broader risks to China’s financial system if its debts are not stabilized.

“Investors are concerned that the Evergrande issue is going represent a domino,” said Jack Ablin, chief investment officer at Cresset Capital Management. “Investors are tending to sell first and look into it to later.”

The Dow Jones Industrial Average fell 787.6 points, or 2.28%, to 33,797.28, the S&P 500 lost 101.41 points, or 2.29%, to 4,331.58 and the Nasdaq Composite dropped 408.25 points, or 2.71%, to 14,635.71.

Economically sensitive sectors, including financials and energy, were hit particularly hard.

The pan-European STOXX 600 index lost 1.67%, with mining stocks sliding.

The selloff on Monday has seen a cumulative $2.2 trillion of value wiped off the market capitalization of world equities from a record high of $97 trillion hit on Sept. 6, according to Refinitiv data.

Worries over Evergrande follow a pullback in equities recently as investors worry over the impact of coronavirus cases on the economy, and when central banks will ease back on monetary stimulus.

The U.S. Federal Reserve is due to meet on Tuesday and Wednesday as investors look for when it will begin pulling back on its bond purchases.

Investors were also keeping an eye on other central bank meetings spanning Brazil, Britain, Hungary, Indonesia, Japan, Norway, the Philippines, South Africa, Sweden, Switzerland, Taiwan and Turkey.

The dollar index rose 0.061%, with the euro unchanged at $1.1725.

The offshore Chinese yuan weakened versus the U.S. currency to its lowest level in nearly a month.

“We are seeing a classic flight to safety in the dollar until we get some sense of clarity on whether or not it is going to be an orderly or disorderly resolution to Evergrande,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, DC.

Benchmark 10-year notes last rose 22/32 in price to yield 1.2972%, from 1.37% late on Friday.

The iShares exchange-traded fund tracking high-yield corporate bonds edged down 0.5%.

Oil prices fell but drew support from signs that some U.S. Gulf output will stay offline for months due to storm damage.

U.S. crude fell 2.18% to $70.40 per barrel and Brent was at $73.99, down 1.79% on the day.

Spot gold added 0.4% to $1,761.29 an ounce, rising off of a one-month low.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Lewis Krauskopf in New York and Tom Arnold in London; Additional reporting by Anushka Trivedi in Bengaluru, Saikat Chatterjee in London, Karen Pierog and Chuck Mikolajczak in New York and Wayne Cole in Sydney; Graphic by Sujata Rao; Editing by Jane Merriman, Mark Potter and Jan Harvey)

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Weak Under 33826, Strong Over 34132

December E-mini Dow Jones Industrial Average futures are down sharply at the mid-session on Monday as concerns about the pace of a global recovery spurred a sell-off across sectors at the start of a week in which the Federal Reserve will decide on potentially tapering its pandemic-era stimulus.

At 16:42 GMT, December E-mini Dow Jones Industrial Average futures are trading 33739, down 723 or -2.10%.

In stock related news, Dow Component Caterpillar Inc is down 4.86%. Goldman Sachs Group Inc is off by 4.4%, followed by American Express and JPMorgan Chase & Co, which are both lower by 3.47%. Dow Inc is down 3.28%.

Daily December E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The next major downside target is the July 19 main bottom at 33533, followed by the June 21 main bottom at 32835.

A trade through 35383 will change the main trend to up. This is highly unlikely, but due to the prolonged move down in terms of price and time, traders should start watching for a closing price reversal bottom chart pattern. This would change the trend, but if confirmed, it could trigger the start of a 2 to 3 day correction.

The main range is 32835 to 35429. The Dow just crossed over to the weak side of its retracement zone at 33826 to 34132, making it new resistance.

Daily Swing Chart Technical Forecast

The direction of the December E-mini Dow Jones Industrial Average into the close on Monday is likely to be determined by trader reaction to 33826.

Bearish Scenario

A sustained move under 33826 will indicate the presence of sellers. If this move continues to generate enough downside momentum then look for the selling to extend into 33533. Taking out this level could trigger an acceleration to the downside with 32835 the next likely target.

Bullish Scenario

A sustained move over 33826 will signal the return of buyers. If this move generates enough upside momentum then look for a possible intraday surge into 34132. Overtaking this area could put the Dow in a position to close higher for the session and thus form a closing price reversal bottom.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 Is Poised to Open Much Lower, Is This a Dip-buying Opportunity?

The broad stock market index broke below its short-term consolidation on Friday, as the S&P 500 index fell below its recent local lows along 4,450 price level. On September 2 the index reached a new record high of 4,545.85. Since then it has lost almost 120 points. This morning stocks are expected to open much lower following big declines in Asia and Europe after news about Evergrande Real Estate Group crisis in China.

The nearest important support level of the broad stock market index is now at 4,300-4,350 and the next support level is at 4,200. On the other hand, the nearest important resistance level is now at 4,400-4,450, marked by the previous support level. The S&P 500 broke below its over four-month-long upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Dow Jones Is Leading Lower

Let’s take a look at the Dow Jones Industrial Average chart. The blue-chip index broke below a potential two-month-long rising wedge downward reversal pattern recently. It remained relatively weaker in August – September, as it didn’t reach a new record high like the S&P 500 and the Nasdaq. Today it may sell off to 34,000 level or lower. The next support level is at around 33,250-33,500 and the resistance level is at 34,500, marked by the recent support level, as we can see on the daily chart:

Apple Breaks Below Upward Trend Line

Apple stock weighs around 6.3% in the S&P 500 index, so it is important for the whole broad stock market picture. In early September it reached a new record high of $157.26. And since then it has been declining. So it looked like a bull trap trading action. We can still see negative technical divergences between the price and indicators and a potential topping pattern. The stock is breaking below an over two-month-long upward trend line.

September Last Year – S&P 500 Fell Almost 11%

In 2020, the S&P 500 index reached a local high of 3,588.11 on September 2 and in just three weeks it fell 10.6% to local low of 3,209.45 on September 24. This year, September’s downward correction has started from the new record high of 4,545.85 on September 3, so there is a striking similarity between those two trading actions.

Conclusion

The S&P 500 index broke below its short-term consolidation on Friday and today it will most likely accelerate the downtrend from the early September record high. However, later in the day we may see some short-term/ intraday bottoming trading action.

The market seems overbought, and we may see some more profound downward correction soon. Therefore, we think that the short position is justified from the risk/reward perspective.

Here’s the breakdown:

  • The market is extending its downtrend today, as the S&P 500 index is likely to open much below 4,400 level.
  • Our speculative short position is still justified from the risk/reward perspective.
  • We are expecting a 5% or bigger correction from the record high.

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Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care

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The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.