The Selloff Continues For U.S. Equities

The post-Labor Day session has been a rough one for equities bulls. Sellers have once again dominated the action, quickly sending the U.S. indices towards corrective territory. At the midway point of the Wall Street session, the DJIA DOW (-445), S&P 500 SPX (-67), and NASDAQ (-310) are all deep into the red. For the time being, it looks like profit-taking and negative sentiment are ruling the day.

On the traditional economic news front, there isn’t much going on. The weekly short-term U.S. Treasuries auctions brought rising yields to 3-month (0.115%) and 6-month (0.125%) T-Bills. In addition, the IBD/TIPP Economic Optimism Index came in at 45.0 for September, down from 46.8 in August. So, at this point, investors are skeptical over the coming election and are moving to safe-haven assets.

For U.S. equities, the action has been overwhelmingly bearish. While not quite the scope of March’s COVID-19 crash, the indices are quickly giving back summertime gains.

NASDAQ Leads U.S. Equities South

Over the past three sessions, September E-mini NASDAQ futures have lost more than 10%. Prices are trending south, having tested the waters beneath last week’s low (11,142.00).

If the carnage continues this week, these support levels may come into play:

• Support(1): 38% COVID-19 Recovery, 10,269
• Support(2): Bollinger MP, 10,276

Bottom Line: In the event we see a mass exodus from U.S. equities, I will be going long the September E-mini NASDAQ from 10,325.25. With an initial stop loss at 10,240.00, this trade produces 680 ticks on a 1:2 risk vs reward. To lessen your capital exposure, one can take the same trade using the September Micro E-mini NASDAQ (MNQ) contract listed on the CME Globex.

ABOUT THE AUTHOR See More

Shain Vernier

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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