Top Story

Stocks struggle amid trade war concerns and rates outlook

US index futures are pointing to a lower open on Wall Street, mirroring a downbeat start for European equities. On a micro level, US index futures have fallen despite the release of mostly better-than-expected company earnings today. Boeing, for example, reported Q2 revenue of $24.3 billion and core EPS of $3.33 and boosted its revenue forecasts, beating expectations of $23.7 billion and $3.27 respectively. Yet its shares fell in pre-market with investors noting the sizeable $418 million blow from additional costs and as its core EPS guidance missed. GM and Fiat Chrysler stocks have dropped sharply in pre-market too despite reporting forecast-beating figures in terms of earnings and revenue. But their shares fell as both carmakers have lowered their outlooks due in part to soaring input costs as a result of surging steel and aluminium costs. On a macro level, sentiment has been hit by ongoing trade war concerns and tariffs pushing up costs for companies. Rising interest rate expectations are also weighing on sentiment. Although so far these concerns have been largely shrugged off, it wouldn’t take much to knock the indices off their perch, especially with stock valuations being so stretched. Meanwhile on a technical level, things could turn really ugly for stocks if the latest chart patterns on the major indices are anything to by.

Russell 2000 creates potential triple top at major resistance zone

Indeed, the charts of the Russell 2000 index paint a rather bearish picture as it has arrived at a major resistance area. On the lower time frame daily chart (see the inset), one can easily observe the formation of three bearish engulfing candles around the 1700 resistance level. After twice failing to break through this level, it had another attempt yesterday and this time it failed again, forming a potential triple top pattern here. The breakdown this time was more pronounced, but it remains to be seen if there will be any real follow-through to the downside this time around. Looking at the longer term picture and the main weekly shows the Russell arriving and stopping at a major resistance area, comprised of the 261.8% Fibonacci exhaustion of the 2007-2009 melt down converging with the top of the rising trend line.

S&P 500: hanging man

Meanwhile the daily chart of the S&P 500 index shows a so-called hanging-man pattern. The candlestick shape of this pattern often appears at the end of an uptrend. It has a very small body and a long lower wick. This one doesn’t exactly have a long leg, but the rest of the characteristics are similar. It should be noted that unlike the Russell and Nasdaq, the S&P 500 hasn’t made a new record high following its drop in February. If this pattern is indeed a valid bearish reversal pattern then we could potentially see the formation of a lower high in the S&P here.

But before we get too bearish, let’s see if these potentially bearish technical patterns are backed by actual selling pressure. Lots of key support levels come in at lower levels for the major indices which could help support the markets. But one thing is clear: the technical indications are far from painting a bullish outlook.


Source: eSignal and FOREX.com. Please note, this product is not available to US clients

Source: eSignal and FOREX.com. Please note, this product is not available to US clients

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

OPEN AN ACCOUNT