Wall Street Ends Lower after Roller Coaster Session

Yesterday’s steep selloff in US stocks, which led to a global rout in risk assets, continued today, despite several violent intraday rally attempts. All of the major indices finished the day in the red, although in after-hours trading we’ve seen another bounce, well describing the hectic environment.

Taking a step back, the most important global benchmarks haven’t recovered much of their recent losses, and even as several short-term measures are screaming for a rally, the technical damage inflicted will likely need a lot of work by bulls to overcome even if the US bull market will continue.

Nasdaq 100 Futures, 4-Hour Chart Analysis

The Nasdaq, which has been in the epicenter of the correction had a relatively strong day with several tech giants holding up well in the stormy market. The Dow and the S&P 500, on the other hand, added to yesterday’s losses, breaking below key support levels, and confirming the wide-spread technical breakdown.

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

Treasuries had their best day in months, with safe-haven buying, the lower than expected CPI readings and President Trump open attack on the Fed’s tightening policies all adding to the bounce in bonds.

While, on the surface, we agree with Donald Trump that the Quantitative Tightening and the rate hikes are the roots of the current risk-off shift (as we stated several times in the past months), the real problems are the asset bubbles inflated by prior central bank policies.

Gold Surges as Technicals Suggest Bounce in Stocks

Russell 2000 Index CFD, 4-Hour Chart Analysis

Back to the daily price moves, the Russell 2000, which led the market lower in the past weeks, had a relatively strong session, despite hitting a new 4-month low, and before the last session of the week, all bets are off about the short-term direction of the market.

We will likely see another wave of selling next week, but the current oversold condition could lead to a short squeeze before the weekend, as the yield pressures, which triggered the mini-panic eased today.

Some short-term breadth measures reached extreme readings, and although history tells us that major crashes actually originate from oversold markets, a short-covering bounce is more likely at this point.

GBP/USD, 4-Hour Chart Analysis

Forex markets were relatively quiet as equities turned volatile, with a distinct Dollar pullback dominating the currency segment. The Japanese Yen added to its gains compared to the Greenback, but the Pound was once again among the biggest winners, and the EUR/USD pair also recovered to the 1.16 level.

Gold Futures, 4-Hour Chart Analysis

Commodities were mixed, as gold surged substantially higher thanks to safe-haven buying and took out the key $1220 resistance level. Copper also showed strength in the face of the risk selloff and the weakness in Chinese assets, but crude oil spiked lower for the second day in a row, with the WTI contract getting close to the $70 per barrel level after trading above $75 just a week ago.

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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.