Bond Yields Provide Morning Pressure, Despite Positive Tiffany Earnings News

Lower bond yields early Wednesday appeared to have the stock market under pressure in an episode …. Data Sources: ICE, Cboe Global Markets.

It feels like we’re watching a rerun. Lower bond yields early Wednesday appeared to have the stock market under pressure in an episode that’s run over and over this summer.

Focus is firmly on the yield curve, which remains inverted between the two- and 10-year. Meanwhile, the 30-year yield is now well below 2%. None of this necessarily means a recession is around the corner, but it does potentially speak to investor caution as additional tariffs are due to take effect on China over the weekend.

In pre-market trading, the 10-year yield fell to near 1.45%, approaching three-year lows, while the 30-year yield was at 1.91%. As we noted earlier this week, drops below 1.5% for the 10-year and 2% for the 30-year might get investors concerned, and now we’re there.

Two-year yields currently trade about five basis points above the 10-year yield. That’s the widest inversion since 2007. This is one of those traditional recession indicators, but there’s no guarantee. Economists don’t forecast falling U.S. gross domestic product growth anytime soon.

Now that yields are down here, the next levels to consider watching down below are 1.9% for the 30-year and 1.35% for the 10-year. We’ll see if they can hold above those key support areas today.

Nerves also seemed rattled overseas after U.K. Prime Minister Boris Johnson said he would schedule the formal reopening of parliament for October 14, CNBC reported. That would restrict parliamentary time before the Brexit deadline and increase the chances of the U.K. leaving the EU with no deal. The British pound is down 1% this morning and stocks across Europe were lower.

In another bit of interesting news, The Wall Street Journal reported that U.S. officials are seeking to block an undersea cable backed by Alphabet Inc (NASDAQ: GOOG), Facebook, Inc. (NASDAQ: FB), and a Chinese partner, in a national-security review that could rewrite the rules of internet connectivity between the U.S. and China. It’s probably worth following this story to see how it plays out, because it’s possible that this plan by the two big FAANG companies might end up being a casualty of the trade war.

Anyone looking for a silver lining might want to check earnings from Tiffany & Co (NYSE: TIF), which beat third-party consensus estimates for earnings and kept its full-year forecast unchanged. Revenue and same-store sales, however, both fell. The company faces pressure from tariffs and falling numbers of Chinese tourist visits to the U.S. Shares initially rose and then fell in pre-market trading.

Stocks Took Cue From Bonds on Tuesday—After Strange Start

After a weird start Tuesday that saw both bonds and stocks on the rise, the relationship got straightened out later on. Stocks took the fall as 10-year yields slipped back under 1.5% for the first time since last week and inverted with the two-year yield.

It wasn’t a major setback for the stock market, with the S&P 500 (SPX) dropping just 0.27% and staying easily within the long-term range and well above the 200-day moving average, which is down near 2800. Generally, the market is still doing pretty well, considering stocks aren’t far from record highs and haven’t shown much sign of testing recent lows. It feels like it’s been a tough month, but stocks are only down 3% overall in August.

What’s a little worrisome here is the continued slow trickle lower in bond yields. It’s unclear what bond investors might be seeking, but maybe there’s a sense that U.S. rates are too high compared with negative rates in Germany. At this point, odds are nearly 100% of a rate cut in September, futures market prices suggest. The bond market at this point is like a spoiled child, and that child wants a rate cut.

If there’s a rate cut, it arguably won’t be because companies need lower borrowing costs. Media reports suggest they don’t, and that most have easy access to capital at rates that are already historically low. So a rate cut at this point would likely be done to boost the economy. It goes back to what Fed Chairman Jerome Powell said about keeping the expansion going.

Could Lower Bond Yields Help Goose Stocks? Maybe

With bond yields falling, it’s gotten to the point where many stocks now pay dividends higher than the 10-year yield. That could make stocks start looking more attractive with yields at 2% to 3% and an aging population seeking yield somewhere. It even could make the downtrodden Energy sector start to seem a little more attractive in some peoples’ eyes, when you consider many of the companies there pay decent dividends.

Those hungry for yield might continue to buy more ‘safe’ stocks, particularly meaning those stocks that offer an attractive dividend but perhaps have less perceived downside risk in a sell-off. Keep in mind, though, that all investments have risk.

In the meantime, it’s a little unclear where things might go from here. If you’re playing along at home, it might be prudent to keep any trades relatively small for now. There’s still a lot of volatility even if we haven’t really gone anywhere in the stock market over the last month and a half. The Cboe Volatility Index (VIX) remained rose to above 21 early Wednesday. Typically anything at 20 or above is a warning of possible turbulence ahead. We’re never more than a tweet away from trouble these days, as if anyone needs a reminder of that after what happened last Friday.

Bond yields fell despite a good read Tuesday on August consumer confidence from the Conference Board. The headline number of 135.1 easily beat third party consensus estimates, and July’s reading got revised upward. Confidence has been at high levels for months now, and that’s probably reflected in the impressive retail earnings picture.

Speaking of retail and consumers, Costco Wholesale Corporation (NASDAQ: COST) shares roared on Tuesday with a 5% gain. A lot of the strength appeared to come from headlines about COST opening a store in Shanghai and seeing lines out the door hours before the doors unlocked. Crowds were so big that the authorities even had to close the street, media reports said. It’s kind of a nice story and shows that the consumer is amazingly healthy, even outside the U.S. However, COST hasn’t always had success going into overseas markets, so we’ll see if the crowds keep coming.

While big-box COST had a good day, small-caps didn’t. The Russell 2000 (RUT) small-cap index did far worse on Tuesday than other major indices, hurt in part by weak Financials and Energy.

Small-Caps, Banks, Under Pressure Early This Week

Softness in the small-caps can sometimes indicate wider troubles looming, though there’s no guarantee. Financials in particular seem to be under pressure from falling Treasury yields, and big banks weren’t immune. Shares of JPMorgan Chase & Co (NYSE: JPM), Citigroup Inc (NYSE: C), and Bank of America Corp (NYSE: BAC) all fell 1% or more on Tuesday.

Energy remained under pressure Tuesday despite sharp gains in the crude oil market. Some analysts said they’re expecting a drawdown in U.S. crude stocks in today’s weekly report out later this morning, so consider checking that. In the big picture, crude could remain relatively weak due to bigger U.S. exports and trade-related demand pressure, analysts told media outlets.

There’s not much data today, but that picks up Thursday with the second government estimate for Gross Domestic Product (GDP). The consensus estimate is for 2% growth, down from the previous 2.1% estimate, according to Briefing.com. A number like that isn’t likely to have much impact on stocks, but something dramatically lower could cause more worries.


FIGURE 1: WEIRD SISTERS: Looking at this year-to-date-chart of the Dollar Index (candlestick) vs. the 10-year Treasury yield (purple line), you might see a discrepancy. Normally, strong Treasuries would imply a weaker dollar. However, the U.S. is one of the only major economies still delivering solid economic data, and many investors appear to be embracing the greenback. The last time the 10-year yield was in this territory, back in the summer of 2016, $DXY traded well below current levels at between 93 and 95. Data Sources: ICE, Cboe Global Markets. Chart source: the thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.

Stuck in Place: Last August might seem long ago, but not much has changed—at least from a stock market perspective. The S&P 500 Index (SPX) closed at 2869 on Tuesday. A year ago on the same day, it closed at 2896, about 1% above current levels. Even as far back as January 2018, the SPX was right at this level, hitting a high of 2872 that month. Some analysts say the stall has to do with uncertainty surrounding trade issues, but it goes beyond that. You have to also consider earnings. Last quarter, S&P 500 company earnings rose just 1.9% year-over-year, according to S&P Global Market Intelligence.

For the full year of 2019, the same firm predicts earnings growth of 1.2%. At the core, stocks are supposed to reflect earnings potential of the underlying companies, and that’s what they’re doing. If you want to hope for better tidings a year from now, you’d better hope S&P Global Market Intelligence’s prediction for 11% earnings growth in 2020 is close to accurate, but it’s worth noting that a year ago the firm projected 6.6% earnings growth for 2019 and had to pull that back over time. That 11% is far from guaranteed, but it looks nice on paper, and companies will likely have easier comparisons.

Playing Defense: If you look at sector performance over the last year, it’s pretty stacked in favor of the so-called “defensive” areas. Leaders include Real Estate, Utilities, and Consumer Staples, in that order. These are the only sectors in the S&P 500 up double-digits since a year ago, while some of the “cyclicals” in the red over that time period include Energy, Industrials, Materials and Financials. It stands to reason that we’d see defensive plays getting the biggest embrace from investors when you consider that a year ago, the 10-year yield was approaching 3% and now can’t seem to hold on to 1.5%.

All this could put investors today in a difficult spot. Bonds and defensive sectors aren’t exactly cheap, but global economic growth is tepid and the Fed is expected to lower rates again next month. So where do investors go? Some analysts continue to recommend the so-called “safety” of dividend stocks and Treasuries, yet prices there seem elevated. This lack of conviction could be one possible reason why the market is stuck in a tight range.

Not Working for the Weekend: As the latter part of the week approaches, investors might want to be cautious about making any moves, with pre-holiday weekend volume taking hold. A light-volume market could help add extra volatility to any move in either direction between now and Friday. One thing we might see is traders squaring up their positions before going home for the weekend, to try and protect against the impact of any trade news that might hit during those three days. Friday in particular could be a light day, with many people turning out the lights after Thursday and taking an extra day off.

Information from TDA is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade.

Image Sourced from Google

Related Posts:

  • No Related Posts

Crypto Price Analysis & Overview: Bitcoin, Ethereum, Ripple, Monetha, Ethereum Classic

The support around $9,700 was being tested over the past week. The action is slightly fragile and the attempts to break up have encountered …

Bitcoin

The support around $9,700 was being tested over the past week. The action is slightly fragile and the attempts to break up have encountered resistance around the 50MA. If the support breaks, we may see a test of $9,200 and if it doesn’t hold, the 200MA is around $7,200 which should be taken into account. The resistance in this range is around the 50MA but it sits slightly above the $11,000 level. The strong resistance lies at $12,800.

BTCUSD-Q0-minBTCUSD-Q0-min

Ethereum

Against the USD, the support around $180 is being considered. It’s also important to consider $160 because if it falls behind that it would lead to a downward trend. Meanwhile, the trend is still considered to be recovering. The resistance in this range is at $200.

ETHUSD-Q0-minETHUSD-Q0-min

Against Bitcoin, support is holding at around 0.0175BTC. Resistance in this range is at 0.019BTC. The downward movements in the graph show a declining trend.

ETHBTC-Q0-minETHBTC-Q0-min

Ripple

Against the USD, the price continues to rely on the lows of 2019 around 25 cents. Relative stability was replaced by the fear of further lows. Resistance in this range is at 28 cents. Is the winter still going on for Ripple?

XRPUSD-Q0-minXRPUSD-Q0-min

Against Bitcoin, the week’s stable price was supported on the low levels of Fibonacci. One could speculate if that’s the floor or if we haven’t seen anything yet. Support in this range is at around 2500 SAT while the resistance is at 2900 SAT.

XRPBTC-Q0-minXRPBTC-Q0-min

Monetha

Against Bitcoin, we saw a strong downward correction with high trading volume. The breakout attempt over the last few days seems to have come along with lots of trading volume as well. Resistance in this range is at 270SAT. Support is built around 215SAT.

MTHBTC-Q0-minMTHBTC-Q0-min

The currency isn’t listed for trading against the USD.

Ethereum Classic

Against the USD, the price has broken down from $8 to $5, where the bottom currently is. In the short term, we can see a positive trend that’s emerging and the graph is drawing lower than before. There was a sharp rise this week as a result of the currency’s involvement in Binance’s lending system. At its peak, it reached $7.5 which put it back to the point where the graph corrected. Support in this range is at around $7, but will it hold?

Against the dollar, the price has broken down from $ 8 to $ 5, where the floor is. In the short term, a positive trend is emerging that the graph is drawing lower than before. A sharp rise this week as a result of the currency’s attachment to the Binance lending system. At its peak, it reached $ 7.5, which put it back to the point from which the graph corrected. Support for the range is built around $ 7. Will it hold?

ETCUSD-Q0-minETCUSD-Q0-min

Against BTC, the volume is rising and the price has broken the 50MA level which signifies resistance to the floor in that range. Resistance is at 0.00075BTC. Support in this range is at around the 0.618 Fibonacci levels – about 0.00065BTC.

ETCBTC-Q0-minETCBTC-Q0-min

Click here to start trading on BitMEX exchange and receive 10% discount on fees for 6 months.

Cryptocurrency charts by TradingView.

Technical analysis tools by Coinigy.

Be the first to know about our price analysis, crypto news and trading tips: Follow us on Telegram or subscribe to our weekly newsletter.

Related Posts:

  • No Related Posts

Beyond Nuggets; The Incredible Shrinking Netflix

(NYSE: CGC), Aurora Cannabis Inc. (NYSE: ACB), Tilray Inc. (Nasdaq: TLRY) … all have struggled to find positive ground. It’s led many investors to …

Great Stuff 8-26-2019

This Is the Song That Never Ends

Yes, it goes on and on, my friend.

Some countries started singing it, not knowing what it was. And they’ll continue singing it forever, just because…

Boy howdy … we had one heck of a weekend. It started off with President Trump’s backlash against increased tariffs from China and ended with a pair of phone calls from Chinese trade representatives.

After the market closed on Friday, Trump detailed his retaliation on boosted China tariffs on U.S. imports. The president said he would lift current tariffs on $250 billion of Chinese products from 25% to 30% on October 1. The remaining 10% tariffs on $300 billion in Chinese goods would rise to 15% on September 1.

Trump also declared that he could force U.S. companies to leave China entirely, citing the Emergency Economic Powers Act of 1977. The president then appeared to express regret over his heated rhetoric early on Sunday, but clarified that his only regret was not lifting tariffs further.

Futures on the Dow plunged more than 300 points late Sunday, as Wall Street played catch-up to the whirlwind of tit-for-tat trade “negotiations.”

Now, the market is rallying. Wait … rallying?

Yes. This morning, President Trump said that the U.S. received two “very good calls” from Beijing indicating that they were ready to “get back to the table.”

And the song goes on…

The Takeaway:

The funny thing about those very good calls to the U.S. is that China’s foreign ministry says it isn’t aware of them.

So, to recap, we have two substantiated escalations in the U.S.-China trade war — tariff hikes from both the U.S. and China — and one unsubstantiated claim — aka two phone calls — that the process is moving forward.

What’s more, China was already coming back to the table in September. A Chinese trade delegation was scheduled to arrive next month even after China’s tariff announcement on Friday.

And yet, the market is rallying. It’s the Pavlov’s market scenario all over again.

The White House says a trade deal is practically done … the market rallies.

The very next day, the White House levies 10% tariffs on Chinese goods … the market plunges.

Ring the bell once — rally. Ring the bell twice — sell-off.

Once again, there’s really only one thing you can do, and that’s idiot-proof your portfolio.

Click here now to find out how.

Great Stuff The Good The Bad and The Ugly

The Good: To Chicken and Beyond

Great Stuff 8-26-2019

Attention vegetarians: No longer will you be left out in the cold when it comes to gobbling down delicious nuggets of chicken!

Beyond Meat Inc. (Nasdaq: BYND) has come to your rescue. The meat-alternative (I always cringe a bit when typing that) company announced a partnership with KFC to start selling Beyond Chicken nuggets this week.

The restaurant formerly known as Kentucky Fried Chicken will roll out the chicken-free chicken on August 27 in Atlanta, Georgia.

Customers will be able to choose between nuggets or boneless wings (they’re meatless, so they’d better be boneless!) with Nashville Hot, Buffalo or Honey BBQ sauce — spicy!

BYND shares have been in a nosedive since peaking in mid-July, but today’s news is helping to boost the shares. Yum! Brands Inc. (NYSE: YUM), KFC’s parent company, is also gaining ground on the news.

The Bad: Minor Shrinkage

Great Stuff 8-26-2019

What’s that? It’s just the cold water? I’m not buying it.

The competition that analysts have warned about for years is finally here, and Netflix Inc. (Nasdaq: NFLX) is feeling the pressure. According to eMarketer, Amazon Prime Video and Hulu are starting to cut into Netflix’s market share.

Riding the strength of shows such as Stranger Things and Orange Is the New Black, Netflix is expected to remain the top streaming service worldwide. However, its market share has steadily dropped from 90% back in 2014 to 87% this year. Both Prime Video and Hulu are taking up the slack and luring viewers away from the big red behemoth.

And then there’s The Walt Disney Co. (NYSE: DIS). According to eMarketer: “While there is no true ‘Netflix killer’ on the market, Disney’s upcoming bundle with Disney+, Hulu and ESPN+ probably comes closest.”

The launch of Disney+ in November will be the true test of how loyal Netflix subscribers are. Will it be Netflix that takes the hit, or Amazon Prime Video?

The Ugly: Hasbro on Death Row

Great Stuff 8-26-2019

In what has to be one of the most bizarre acquisitions of the year, toymaker Hasbro Inc. (Nasdaq: HAS) is now the proud owner of Death Row Records.

If you’re not up to speed, Death Row Records is famous for artists such as Tupac Shakur, Snoop Dogg and Dr. Dre.

These storied artists are now under the same umbrella as My Little Pony, Peppa Pig and Mr. Potato Head.

Hasbro was clearly after the Peppa Pig brand when it bought Canadian firm Entertainment One Ltd. (OTC: ENTMF). We can count Death Row as an odd bonus.

HAS shares plunged more than 9% on Friday following news of the acquisition, but the shares are recovering today.

Great Stuff Chart of the Week

Great Stuff 8-26-2019

I wish this was a tongue-in-cheek graphic. But it’s surprisingly accurate for what we’ve seen since the U.S.-China trade war began.

The cycle usually takes a couple of weeks to play out. However, we flew through the “trade war fears” and “hints at resolution” steps over the weekend. I’ve conveniently marked where we are currently in the cycle. I would like to tell you that the “no progress is made” step won’t occur until the Chinese delegation comes to Washington, D.C., in September … but Twitter exists.

Do you have any comments on the U.S.-China trade war? Thoughts on Wall Street’s whipsawing activity? Feel free to let me know, or just vent, by dropping me a line at GreatStuffToday@banyanhill.com.

Great Stuff: There’s Still Time to Get High

Cannabis stocks haven’t exactly blown the doors off the market lately.

Canopy Growth Corp. (NYSE: CGC), Aurora Cannabis Inc. (NYSE: ACB), Tilray Inc. (Nasdaq: TLRY) … all have struggled to find positive ground.

It’s led many investors to believe that the best days of marijuana investing are over. That they’ve somehow missed the boat.

That sentiment couldn’t be further from the truth.

We’re still in the early days of cannabis investing. And while you may lament not buying these companies when they were dollar stocks, you can still get in on the big gains yet to come.

Banyan Hill expert Matt Badiali recently compared cannabis companies to a similar industry: energy drinks. They’re not as dissimilar as you might expect.

“My point is, cannabis is a brand-new market. Remember, it has only been legal in Canada since October 2018 — that’s less than a year. These stocks are just building out sales and brands. There is a long way to go,” Matt said in his latest article, “A Critical Moment In Cannabis Stocks — Why You Need to Get in Now.”

To get the best advice on investing in the accelerating cannabis market — including five pot stocks you must own before more states legalize — click here now!

Until next time, good trading!

Regards,

Joseph Hargett

Great Stuff Managing Editor, Banyan Hill Publishing

Related Posts:

  • No Related Posts

Ethereum & Stellar’s Lumen Tech Analysis –26/08/19

Ethereum slid by 2.26% on Sunday. Following on from a 1.9% fall on Saturday, Ethereum ended the day at $186.59. A midday intraday high $192.76 …

Ethereum

Key Highlights

  • Ethereum slid by 2.26% on Sunday. Following on from a 1.9% fall on Saturday, Ethereum ended the day at $186.59.
  • A midday intraday high $192.76 saw Ethereum fall well short of the first major resistance level at $194.98.
  • A late intraday low $182.04 saw Ethereum fall through the first major support level at $186.41.
  • The extended bearish trend, formed at late April 2018’s swing hi $828.97, remained firmly intact. The reversal from June’s current year high $364.49 back through the 23.6% FIB of $257 reaffirmed the extended bearish trend.

Ethereum Price Support

Ethereum slid by 2.26% on Sunday. Following on from a 1.9% fall on Saturday, Ethereum ended the day at $186.59.

A bullish morning saw Ethereum rally to a midday intraday high $192.76 before hitting reverse.

Falling short of the first major resistance level at $194.98, Ethereum slid to a late intraday low $182.04.

The reversal saw Ethereum fall through the first major support level at $186.41.

Coming within range of the second major support level at $181.93, Ethereum moved back through to $186 levels to limit the downside on the day.

For the week, a 4th day in the red left Ethereum down by 4.19%.

The extended bearish trend, formed at late April 2018’s swing hi $828.97, remained firmly intact. A reversal from June’s current year high $364.49 back through the 23.6% FIB of $257 reaffirmed the extended bearish trend.

At the time of writing, Ethereum was up by 3.46% to $193.04. A bullish start to the day saw Ethereum rally from a morning low $186.6 to a high $194.28 before easing back.

Steering clear of the major support levels, Ethereum broke through the first major resistance level at $192.22.

For the day ahead

Ethereum would need to hold above the first major resistance level to support a run at the second major resistance level at $197.85.

Support from the broader market would be needed, however, for Ethereum to hold onto $192 levels.

In the event of a second rally, a move through the second major resistance level would bring $200 levels into play.

Failure to hold above the first major resistance level could see Ethereum give up the early gains.

A fall through $187 levels would bring the first major support level at $181.5 into play.

Barring a crypto meltdown, Ethereum should continue to steer clear of sub-$180 levels.

Looking at the Technical Indicators

Major Support Level: $181.50

Major Resistance Level: $192.22

23.6% FIB Retracement Level: $257

38.2% FIB Retracement Level: $367

62% FIB Retracement Level: $543

Stellar’s Lumen

Key Highlights

  • Stellar’s Lumen slipped by 1.32% on Sunday. Reversing a trend-bucking 0.56% gain from Saturday, Stellar’s Lumen ended the day at $0.069319
  • A mid-morning intraday high $0.072398 saw Stellar’s Lumen break through the first major resistance level at $0.07150.
  • A late intraday low $0.068254 saw Stellar’s Lumen fall through the first major support level at $0.06840.
  • The extended bearish trend remained firmly intact, with Stellar’s Lumen continuing to fall short of the 23.6% FIB of $0.12220.

How to Buy Stellar’s Lumen

Stellar’s Lumen Price Support

Stellar’s Lumen slipped by 1.32% on Sunday. Reversing a trend-bucking 0.56% gain from Saturday, Stellar’s Lumen ended the day at $0.069319.

A bullish start to the day saw Stellar’s Lumen rally to a mid-morning intraday high $0.072398 before hitting reverse.

The early rally saw Stellar’s Lumen break through the first major resistance level at $0.07150. Stellar’s Lumen came within range of the second major resistance level at $0.07270 before sliding to a late intraday low $0.068254.

Finding support at the first major support level at $0.06840, Stellar’s Lumen moved back through to $0.069 levels to limit the downside.

A 3rd day in the red out of 7 left Stellar’s Lumen down by 1.8% for the week.

The extended bearish trend remained firmly intact. Stellar’s Lumen continued to fall short of the 23.6% FIB of $0.12220 following a pullback from $0.13 levels back in late June. Stellar’s Lumen fell to a new swing low $0.065751 on 22nd August.

This Morning

At the time of writing, Stellar’s Lumen was up by 1.58% to $0.07041. Tracking the broader market, Stellar’s Lumen rallied from a morning low $0.070133 to a high $0.071308.

Steering well clear of the major support levels, Stellar’s Lumen came within range of the first major resistance level at $0.0717.

For the day ahead

Stellar’s Lumen would need to hold onto $0.070 levels to support another run at the first major resistance level at $0.0717.

Continued support from the broader market would be needed, however, for Stellar’s Lumen to break out from the early high $0.071308.

In the event of a second rally later in the day, Stellar’s Lumen could break out from Sunday’s high $0.072398.

We would expect the second major resistance level at $0.0741 to limit any upside, however.

Failure to hold onto $0.070 levels could see Stellar’s Lumen hit reverse. A fall through Sunday’s low $0.068254 would bring the first major support level at $0.0676 into play.

Barring a crypto meltdown, we would expect Stellar’s Lumen to steer clear of sub-$0.067 levels on the day.

Looking at the Technical Indicators

Major Support Level: $0.06760

Major Resistance Level: $0.07170

23.6% FIB Retracement Level: $0.1222

38% FIB Retracement Level: $0.1571

62% FIB Retracement Level: $0.2136

Please let us know what you think in the comments below.

Thanks, Bob

Related Posts:

  • No Related Posts

Dow futures drop 300 points as US-China trade war escalates

U.S. stock futures fell sharply on Sunday night following the latest escalation in the U.S.-China trade war by President Donald Trump. Dow Jones …

U.S. stock futures pointed to a recovery Monday morning after President Trump said China is ready to come back to the negotiating table following a phone call Sunday and the two countries will start talking very seriously.

Dow Jones Industrial Average futures traded 154 points higher, indicating a rise of 208.10 points at Monday’s open, as of 3:27 a.m. ET Monday. S&P 500 and Nasdaq 100 futures also pointed to opening gains for both indexes.

Speaking to reporters at the Group of Seven (G-7) meeting in Biarritz in France Monday, Trump said the two countries would start talking very seriously.

“China called last night our top trade people and said ‘let’s get back to the table’ so we will be getting back to the table and I think they want to do something. They have been hurt very badly but they understand this is the right thing to do and I have great respect for it. This is a very positive development for the world,” Trump said.

Futures had indicated declines after the weekend saw an escalation of the trade war. Trump tweeted Friday after the market close that the U.S. will raise tariffs on $250 billion worth of Chinese goods to 30% from 25%. Tariffs on another $300 billion in Chinese products will also go up to 15% from 10%, he said. The levies on the $250 billion worth of goods are scheduled to kick in Oct. 1, while the duties on the $300 billion are set to go into effect in two stages on Sept. 1 and Dec. 15.

“Sadly, past Administrations have allowed China to get so far ahead of Fair and Balanced Trade that it has become a great burden to the American Taxpayer,” Trump said in his tweets. “As President, I can no longer allow this to happen!”

Trump later said at the G-7 summit in in Biarritz, France he regrets not raising tariffs on China even more, noting he has “second thoughts about everything.” The president added he could declare the trade war a national emergency.

Trump’s comments and tweets came after China unveiled new tariffs Friday on $75 billion worth of U.S. products, including autos. Trump had also ordered on Friday that U.S. companies move their Chinese operations elsewhere, sending U.S. stocks tumbling.

The major indexes all fell more than 2% on Friday, with the Dow Jones Industrial Average losing 623.34 points. Those declines wiped out the weekly gains the averages had built through Thursday’s close. After Friday’s session, the Dow ended down 1% for the week, while the S&P 500 and Nasdaq Composite concluded the week down 1.4% and 1.8%, respectively. Last week also marked the indexes’ fourth straight weekly loss, their longest since May.

China and the U.S. have been engaged in a trade war since last year. The economic conflict has dampened economic and corporate earnings growth expectations as investors and companies weigh its impact on the global economy. The U.S. and China are the world’s largest economies.

“The ongoing Trade War is redrawing global supply chains, claiming casualties in the process,” Julian Emanuel, chief equity and derivatives strategist at BTIG, said in a note. “As persistent headwinds intersect with traditional seasonal softness, recent volatility can be expected to continue in the near term as markets await policy developments.”

The trade war is taking place against a backdrop of softening economic growth. Germany’s manufacturing sector is contracting while China’s economy grew at its slowest pace in nearly three decades in the second quarter.

The U.S. bond market has also flashed a recession signal recently. The 10-year Treasury yield has dipped below its 2-year counterpart. This phenomenon is known as a yield-curve inversion. Experts fear it because it has historically preceded recessionary periods.

This economic soft patch has led central banks to ease monetary conditions, including the Federal Reserve.

Fed Chairman Jerome Powell said Friday the central bank will “act as appropriate” to sustain the current U.S. economic expansion, which is the longest in history. However, Powell failed to clearly signal that another rate cut was imminent in September.

“The problem facing stocks isn’t restrictive monetary policy but instead Trump’s destructive trade policy,” Adam Crisafulli, executive director at J.P. Morgan, said in a note Sunday. “Rates are already very low and low yields coupled with inverted curves are becoming counterproductive for stocks – as a result, central banks are doing about all they can right now.”

Last month, the Fed cut rates by 25 basis points. Market expectations for a September rate cut are also at 100%, according to the CME Group’s FedWatch tool.

—CNBC’s Eustance Huang, Michael Bloom and Chris Hayes contributed to this report.

Subscribe to CNBC on YouTube.

Related Posts:

  • No Related Posts