Stocks Trade Off Lows but Selling Pressure Persists

Risk-off sentiment is still dominating trading across traditional financial markets, despite today’s bounce, with European assets generally underperforming their global peers. Equity markets are slightly higher after three bearish sessions, but expect the Nasdaq and the Russell 2000, all of the major benchmarks are well off their all-time highs, as the effects of the February crash are still clearly visible in most of the markets.

DAX, 4-Hour Chart Analysis

With the recent move lower, the S&P 500 and the Dow are back near the middle of the range that developed after the wild February swing, and that means that even as the tech benchmark and the small-cap index broke out to new highs, we can’t conclude the end of the correction, especially given the weakness in global markets.

S&P 500 Futures, 4-Hour Chart Analysis

Notably, the Shanghai Composite remains below the key 3000 level, and should the Chinese market enter into an outright bear market, the synchronized growth narrative could get another hit. Trade war fears smashed the already weak Chinese market lower, and as the credit-fueled expansion in the country is in a very fragile state, it could be the trigger for a significant downturn.

Shanghai Composite, 4-Hour Chart Analysis

The only key economic indicator was a small negative surprise as the US Consumer Confidence index dropped unexpectedly, but the, measure is at a very high level historically. Bond markets are calm after yesterday’s drop in Treasury yields, as trading activity and volatility is lower than in recent days, and emerging markets continue to consolidate.

Dollar Pulls back as Pound Surges

EUR/USD, 4-Hour Chart Analysis

The Dollar’s rally was the most interesting move of the day in the forex segment, as despite the bounce in risk assets, the reserve currency erased some of its recent losses, and it might be ready to test its highs against the Euro and the risk-on majors. Besides the Dollar, there were small movements in the top currencies, although the still oversold Canadian Dollar managed to gain some ground on most of its major peers, keeping up with the USD rally.

Commodity markets are relatively active, with oil still pushing higher, as shorts are scrambling for the exits following last week’s OPEC decision. Despite the current rally, we don’t expect new highs in oil, and as the WTI contract topped $70 the short-covering might have already finished.

Gold Futures, 4-Hour Chart Analysis

Gold continued to bleed lower, getting close to the $1250 level, and while the precious metal is definitely oversold, and the long-term outlook is positive, the short-term trend is clearly bearish.

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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.