The XJO yesterday sold of heavily but held support at 6,400. 6,400 has become the level to break to confirm the market will continue lower. The XJO technically is still in a short term downtrend as we haven’t seen a higher peak and trough. With the Futures up this morning likely stay inside the descending triangle pattern. If we take out 6,400, the market will likely look to come down to a 10% correction around 6,200 and the 200 day MA.
US markets recovered some of the last week’s large move down; the Dow closed 269.93 points higher (1.05%) and the S&P 500 was up 31.27 points (1.10%). Most European major markets were higher, Asian markets closed lower.
The US markets bounced off support at 2,840, closing out an inside day. Comments from Trump suggesting that Chinese negotiators called the US and are ready to get back to the table saw markets rise but on light volumes. Hu Xijin, the Global Time’s editor and Chief tweeted overnight indicating the Trump is over-exaggerating his contacts with US negotiators.
Based on what I know, Chinese and US top negotiators didn’t hold phone talks in recent days. The two sides have been keeping contact at technical level, it doesn’t have significance that President Trump suggested. China didn’t change its position. China won’t cave to US pressure.
— Hu Xijin 胡锡进 (@HuXijin_GT) August 26, 2019
Markets fell last week after China on announced that they will introduce new tariffs on another $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. So it seems there is some confusion on whether the US and China will get back to the negotiation table or not.
XJO Implied Volatility was up 13.65% and closed at 17.176%. The US volatility was up 13.66% and closed at 19.32%.
Crude is consolidating between $60US and $50US a barrel.
Gold is rising strongly with economic concerns rising.
Iron Ore pulled back following overall markets lower after tensions rise on trade.
The Aussie dollar is consolidating around 67.50 US cents.
Markets will likely remain on edge as they await more clarity on whether the trade war will continue to get worse, or if they will actually get back to the negotiation table. Trump’s comments overnight have put a stop to the fear selling for the moment but it wouldn’t take much to see markets tip back into the red considering the nervous nature at the moment. Today we will see WES and CTX report.