Pre-Market Analysis and Chartbook: Risk Assets Under Pressure as Volatility Returns

Friday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,902 -0.29%
DAX 30 12,142 -0.83%
WTI Crude Oil 74,51 -0.16%
GOLD 1,202 -0.09%
Bitcoin 6,528 -0.29%
EUR/USD 1.1494 -0.17%

Stocks have been choppy with a bearish bias today in European trading, with yesterday’s steep US selloff still affecting markets across the globe. All eyes are still on US treasury yields, which continue to push higher to new multi-year lows as the market awaits today’s government Employment Report. European economic releases were on the positive side today, with German Factory Orders, the PPI Index, and Italian Retail Sales all came in above the consensus estimates.

Dow 30 Futures, 4-Hour Chart Analysis

Despite the positive impulses and the after-hours bounce in the US, stocks are drifting lower in the low-volume environment and US stocks futures are near their session lows, with the Nasdaq leading the way lower yet again.

The Dow, on the other hand, has been relatively strong in the past few days, and it’s holding up well today in pre-market trading as well, as investors pile into the relatively safe mega-cap names.

VIX (US Volatility Index), 4-Hour Chart Analysis

The downward drift in the Volatility Index (VIX) ended yesterday with a bang, with the key risk measure shooting higher due to the heavy selling in the thin, pre-Jobs-Friday environment.

The VIX is testing the declining trendline and that makes today’s Employment Report even more important, as a full-blown correction in the US could push the already weak overseas markets to new lows. With China already in a bear market, and with the European benchmarks being around 10% below their highs, a bearish global trend could be established and the US bull could also be in danger.

Europe’s Bounce Fading Amid Funding Crisis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

The main European benchmarks are catching up with their US peers on the downside today, and the DAX and the EuroStoxx 50 are both already trading near their three-week lows, despite their recent stability and today’s positive economic reports.

British assets, especially the Pound is outperforming the rest of Europe, and the EUR/GBP pair hit its lowest level since mid-July amid the still lingering Italian budget troubles.

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair is back in the center of attention today, and we expect huge moves in the most traded forex pair, and the other majors after the release of the Employment Report. The weak rally attempts of this weak are pointing to massive selling pressure in the Euro, and barring a lower than expected US Hourly Earnings number, the short-term bearish trend is likely to continue and even the August lows near 1.13 could be in danger soon.

With emerging markets also getting hit yesterday, the Dollar index is also edging towards its August highs, and a break above those could unleash another wave of selling in global risk assets.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 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

Forex

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

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Author:
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.