3 Things You Need to Know About the Market Today: Stock Sell-Off, Volatility Spike, Oil Reversal
1, Risk Rally Fizzles Out as Trade and Growth Worries Weigh
DAX 30 Index CFD, 4-Hour Chart Analysis
We saw several signs that the global counter-trend rally is losing steam, and yesterday several key benchmarks competed trendline and support breaks. Another batch of negative European economic releases, Fed Chair Jerome Powell’s upbeat speech, and the resurfacing trade worries weighed on equities and other risk assets, and today the decline continues across the board.
The fact that Donald Trump won’t meet Chinese leader Xi before the March 1st trade deadline spooked, since the US President stated that a deal won’t happen until a second highest-level meeting, while White House advisor said that there’s lot of work to be done until an agreement.
Europe continues to supply worrying news both fundamentally and technically, as Italian Industrial Production missed the consensus estimate by a mile, and even though the French number was a hair abvoe expected the overall picture in the segment is dismal. The German Trade Balance for December was better-than-expected, helped by the weak Euro, and that’s a trend that could help the struggling European economy, should the weakness in the common currency continue this year.
The DAX, which has been leading global markets in recent months dipped below the key 11,000 level, and the major US indices all fell below their rising short-term trendlines, and given the overbought broader picture, traders should be defensive towards global stocks.
2, VIX Spikes Above Key Level
VIX (US Volatility Index), 4-Hour Chart Analysis
The US Volatility Index (VIX) spiked higher during yesterday’s sell-off, recapturing the key 17 level that has marked the short-term tops in recent months, ever since the regime change in volatility in October. The “Fear Index” dipped below that support zone this week but should it get back above 20 in the coming week, the broad bearish shift on Wall Street would be confirmed again.
The behavior of the VIX will be crucial for all of the key asset classes, and it will be an important tell regarding the fate of the counter-trend move. Chinese markets will reopen on Monday, and with the other relatively weak markets still lagging behind, we could be in for some fireworks next week, with a possible spike in volatility and trading activity following the low-volume rally of the recent period.
3, Oil Completes Short-Term Reversal Pattern
WTI Crude Oil, 4-Hour Chart Analysis
With the global growth worries and the possible US legal action against the OPEC putting pressure energy markets, oil’s already weak momentum weakened further. The WTI crude contract completed the reversal pattern that we pointed out this week, moving briefly above the $55 per barrel level and turning lower afterwards, breaking below the rising short-term trendline, and a couple of key short-term support levels.
While there are further support levels found between $50.50 and $52, marking the swing lows from January, the broader downtrend could soon resume, and downside risks are mounting, with the short-term setup being bearish below the $53.50 level. Although the topping process could continue, traders shouldn’t enter long positions here, as the commodity will likely establish a short-term downtrend.
Major Stock Indices
S&P 500 Futures, 4-Hour Chart Analysis
Nasdaq 100 Futures, 4-Hour Chart Analysis
Dow 30 Futures, 4-Hour Chart Analysis
FTSE 100 Index CFD, 4-Hour Chart Analysis
EuroStoxx50 Index CFD, 4-Hour Chart Analysis
Nikkei 225 Futures, 4-Hour Chart Analysis
Shanghai Composite Index CFD, 4-Hour Chart Analysis
EEM (Emerging Markets ETF), 4-Hour Chart Analysis
EUR/USD, 4-Hour Chart Analysis
USD/JPY, 4-Hour Chart Analysis
GBP/USD, 4-Hour Chart Analysis
EUR/GBP, 4-Hour Chart Analysis
AUD/USD, 4-Hour Chart Analysis
Gold Futures, 4-Hour Chart Analysis
Copper Futures, 4-Hour Chart Analysis
Featured image from Shutterstock