The XJO yesterday regained some of the heavy sell-offs after testing the 6,400 key support level. So we are back trading in the edge of a pennant pattern waiting to see if we break up or down. If 6,400 breaks, we will reconfirm the downtrend with target around 6,200 and the 200 day MA, which is also the 10% correction level. If the market breaks 6,550 then things will be looking a bit more bullish. The futures today are suggesting a weak open so expect the market to remain inside these levels today.
US markets edge lower, Dow closed 120.93 points lower (-0.47%) and the S&P 500 was down 9.22 points (-0.32%). Most other major markets where higher.
The S&P500 couldn’t hold on to early gains overnight, pulling back to close slightly lower. This comes as China further discredited Donald Trump’s comment that he received a phone call from China and that they are coming back to the negotiation table. China in the past has walked away from negotiations saying that they will not negotiate under the pressure of US tariffs.
So what we do know is that last week China introduced further tariffs on $75 billion worth of U.S. goods, including autos. Trump then retaliated raising existing tariffs on $250 billion worth of Chinese goods to 30% from 25% starting in October. He also raised tariffs from 10% to 15% on another $300 billion of Chinese goods. Some of those tariffs will start on Sept. 1 while others have been delayed until Dec. 15. China is also making a move to help them become less reliant on exports by stimulated their local economy.
Technically the S&P500 continues to hold the 2,840 support level, forming a channel between 2,940 and 2,840. Until one of these levels breaks it is difficult to have an overall directional view of the market. With IV still very high we can expect markets to continue to move large.
XJO Implied Volatility fell 7.73% and closed at 15.943%. The US volatility was up 2.17% and closed at 20.31%.
Crude is consolidating between $60US and $50US a barrel.
Gold is rising strongly with economic concerns rising.
Iron Ore continued to pull back, following overall markets lower after tensions rise on trade.
The Aussie dollar is consolidating around 67.50 US cents.
Markets seem to be remaining fairly resilient considering the events over the weekend. At this stage, the XJO is following the major US indices. The S&P500 continues to hold the 2,840 level and the XJO continues to hold 6,400. Unless we see Trump come out with a way to get a deal done with China or we see the FED come to the rescue, we will likely see markets continue to remain weak.