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

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Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.