Pre-Market: Stocks Remain Choppy as Banks, China Lead Bounce

Equities are still trying to stage a durable rally off the recent lows, as the oversold short-term momentum readings are still present. Today’s bounce has been fueled by a rally in China and reports on a possible dovish change in the ECB’s quantitative easing program.

The plan, which is similar to the FED’s operation Twist, is supposed to help keeping long-term yields low by reinvesting the maturing bond holdings of the central bank into longer dated bonds. On the flip-side, trade war fears are still weighing on sentiment, and the rumor that Trump is considering the option to leave the World Trade Organization sparked some selling today, in pre-market action.

DAX, 4-Hour Chart Analysis

The EU summit, which saw no progress regarding the major issues yesterday also provided something to cheer about today, as the members agreed on a plan to reduce the pressure on the countries most affected by migration. From a technical standpoint today’s rally didn’t change anything so far, with the short-term declining trend still intact in equities.

Nasdaq, 4-Hour Chart Analysis

In the US, the major indices are up before the opening bell, and the benchmarks held up above the short-term levels that we pointed out yesterday, with the Nasdaq 100 trading north of 7000 and the S&P 500 being back above 2700.

The oversold short-term readings are almost cleared in the tech sector, and the coming sessions will days will be crucial for bulls, as the declining short-term trendlines will be tested. Given the international weakness, we remain defensive on equities here.

Goldman Sachs (GS), 4-Hour Chart Analysis

US Financials made also headlines today as the Fed’s stress test pointed to strong balance sheets in the segment, leading to a rally in the recently struggling segment that has been hurt by the recent global bond market jitters. The segment broke a long losing streak, but although technicals suggest a correction, banks still seem to be leading the way lower globally and in the US alike.

Dollar Still in No Man’s Land

DXY, 4-Hour Chart Analysis

The battered Euro also bounced higher together with global stocks, and as the Dollar is still overbought across the board, a longer consolidation period is still possible, despite the clear bullish trend in the Greenback. Looking at the longer term chart, there is still room for correction after yesterday’s fake-out rally, so choppy conditions might continue to dominate the crucial currency’s market, and the current setup is not favorable for opening new positions in the Dollar.

The main commodities are virtually unchanged so far today, as gold continues to hover around the $1250 level, while crude oil is holding on to most of its recent gains as we head into the last session of the quarter on Wall Street.

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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.