NYSE

U.S. Indices Continue To Falter-Here’s Why

Posted Wednesday, April 25, 2018 by
Shain Vernier • 2 min read

After a sudden plunge in the U.S. indices during the late Tuesday session, the markets have opened negative. At press time, the DJIA is off 50 and the S&P 500 down 17. While these aren’t earth-shattering numbers, they do illustrate growing investor angst. So what is the reason for the negative action?

There are a few possible culprits:

  • 10-year bonds are trading over 3%, gaining the attention of fixed-income investors.
  • While corporate earnings have been strong, many are eagerly awaiting Friday’s U.S. GDP report.
  • Forthcoming announcements from the ECB and BoJ have many equities players taking a wait-and-see approach amid trade war tensions.

My personal view is that the geopolitical scene is dictating much of the action on Wall Street. Friday’s inter-Korean summit and pending U.S./North Korea meeting are wildcards. Traders hold a tremendous amount of skepticism toward the intentions of North Korean leader Kim Jong Un. A surprise nuclear or ballistic missile test in the midst of historic talks could throw markets into a tailspin — it appears investors are already pricing this possibility in.

S&P 500 Technicals

The technical roadmap for the E-mini S&P 500 is fairly straightforward. Price is right at the Daily SMA, illustrating the market’s relative “about-face” toward U.S. equities.

SP
June E-mini S&P 500 (ES), Daily Chart

The S&P 500 has posted a bit of a rally after an early sell-off beneath Tuesday’s low. Here are the key numbers to watch for the remainder of the session:

  • Resistance(1): Daily SMA, 2630.50
  • Resistance(2): Bollinger MP, 2667.00

Overview: Yesterday’s flash selloff took this analyst by surprise. It appeared that we were heading for a period of consolidation before Friday’s GDP release and inter-Korean summit. Nope. Sellers pounded the U.S. indices hard to the bear.

I expect things to slow down a bit as the week wears on. For the June E-mini S&Ps, consolidation between 2625.00 and 2667.00 is one scenario that appears probable. Nonetheless, after yesterday’s surprise move I will be on the sidelines for the U.S. indices until tomorrow’s session.

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About the author

Shain Vernier is our US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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