The XJO on Friday edged out a gain, pushing close to the 6,547 resistance and looking like it could be starting to break the downtrend line. The XJO technically is still in a short term downtrend as we haven’t seen a higher peak and trough. With the Futures Down this morning, we will test support at 6,400. 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 market crashed as the trade war intensified. The Dow closed 623.34 points lower (-2.37%) and the S&P 500 was down 75.84 points (-2.59%). Most European major markets were lower, Asian markets were mixed.
The US markets fell back to the 2,840 support level, but with the futures down over 23 points it is likely the US market will break down tonight to confirm a short term downtrend. Technically the next target will be 2,800 and 2,725, after that the target will be a 10% correction.
China on Friday announced that they will introduce new tariffs on another $75 billion worth of U.S. goods, including cars. This saw the European markets close lower, it didn’t take long for Trump to come out and retaliate; Trump said the U.S. will raise existing tariffs on $250 billion worth of Chinese goods to 30% from 25% 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. On Twitter, he called for all US companies to stop manufacturing in China and to find somewhere else. At this stage, it is unclear if he has the authority to officially do this.
Otherwise in Jackson Hole, Powell again pledged to “act as appropriate to sustain the expansion,”. He also spoke tariffs, saying there is no “rulebook” on trade wars and that the Fed may have to “look through” short-range developments. So we are getting another mixed message about whether they will cut rates in September or not, the market may have wanted a clearer message considering the escalation in the trade war and the inversion of the yield curve.
XJO Implied Volatility fell 4.78% and closed at 14.832%. The US volatility was up 5.28% and closed at 16.68%.
Crude is consolidating between $60US and $50US a barrel.
Gold is rising strongly with economic concerns rising.
Iron Ore Port and Futures were up but may not have reacted to Trump retaliation.
The Aussie dollar fell strong and came back below 67.00 US cents.
Commodities outside of Iron Ore hammered lower again, But the Iron Ore market may have not reacted to the escalation from Donald Trump over the weekend so we will have to wait for the Dalian futures to reopen at 11 am. The market sell down today will likely hit all sectors. At this stage, it seems very likely that markets will continue to fall sharply. We will need to see a positive catalyst to see the market turn back around. Markets will be waiting for the FED announcement on the 17-18th Of September. The Aussie reporting season is coming towards the end with most of the reporting being completed by the end of this week. Today out of the optional stocks we will see FMG and IFL report.