Stocks Struggle Amid Trade War Concerns And Rates Outlook
FOREX.com | Jul 25, 2018 14:09
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 (NYSE:BA), 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 (NYSE:GM) and Fiat Chrysler (LON:0QXR) 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.
Get The App
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.
h3 Russell Weekly/h3Disclaimer: 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.
Original post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.