Stocks Fail to Rally as Treasury Yields Settle Down

Global equity markets had a very hectic day, with the US-Saudi standoff, the weakness in Chinese stocks, and a lackluster US Retail Sales report setting the tone for risk assets. The effects of last week’s deep selloff were still apparent, and the major global benchmarks failed to the reclaim major technical levels, leaving the short-term trend clearly bearish.

Also, with the Shanghai Composite continuing its bear market with yet another 4-year low, and with the DAX also confirming a long-term breakdown, the US bull market will have an even steeper mountain to climb to reach new all-time highs than after the February mini-crash.

Nasdaq 100 Futures, 4-Hour Chart Analysis

The Nasdaq had another ugly session, with the leading tech giants weighing heavily on the market, despite Friday’s oversold bounce, and that makes another swing lower in the coming weeks even more likely than before. The Dow and the S&P 500 also finished in the red, even as several consumer-related stocks rose, despite the miss in both the headline and the Core Retail Sales measure.

Russell 2000, 4-Hour Chart Analysis

On a slightly positive note, small caps managed to close a tad in the green, but the segment is still clearly wounded, with the Russell 2000 trading just above its recent low. That said, further strength in the coming days could lead a bounce in risk assets, as sentiment is gloomy, and the short-term momentum indicators are still oversold across the board.

2-Year US Treasury Yield, 4-Hour Chart Analysis

Treasury yields remained stable in part thanks to the worse than expected retail sales report, and before Wednesday’s FOMC meeting minutes, we could have another relatively quiet day in Treasuries tomorrow.

Crude Oil Gives Back Gains as Gold Nears $1240

DXY, 4-Hour Chart Analysis

The Dollar Index pulled back yet again after Friday’s bounce, with the Japanese Yen and gold being favored by safe-haven buyers again. Gold hit its highest level since late July, and it got close to the $1240 level and another strong resistance zone after its Thursday surge above $1220.

Risk-on currencies also gained ground on the Greenback in the nervous environment, as the Saudi’s oil weapon threat, Trump’s recent push against the Fed’s tight monetary policies, and the ever increasing US budget deficit got the best of the reserve currency.

WTI Crude Oil Futures, 4-Hour Chart Analysis

Donald Trump managed to divert public attention by opening the Saudi diplomatic front, but for now, energy markets are calling the bluff, as despite the early gains in crude oil, the WTI contract got stuck below the key support zone near $72.50.

Rumors surfaced in late trading that the Kingdom is set to admit the accidental death of Khashoggi, and it will be very interesting to see how the Trump administration reacts to that, as we still suspect that we won’t see a deeper conflict in the near future.

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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.