NASDAQ Composite (.IXIC) Futures Fall as Trade War Triggers Recession Fears
U.S. stock futures plunged ahead of trading on Monday on concerns that the lingering trade war between the United States and China could push the global and domestic economies into a full-blown recession. The Dow lost around 150 points after Hong Kong International Airport terminated all departures for the rest of the day following intensification in protests which have paralyzed the city.
Since June, violent demonstrations by pro-democracy groups have created the worst crisis witnessed by the Asian financial capital in decades. The protests are also the stiffest challenge faced by Xi Jinping since he assumed office in 2012. These protests are one of the factors pushing treasury yields lower this morning.
The Dow Jones Industrial Average (DJI) declined 0.3% to close at 26,287.44. The S&P 500 tumbled 0.7% to close at 2,918.65. Meanwhile, the Nasdaq Composite Index closed at 7,959.14, shedding 1%. The fear-gauge CBOE Volatility Index (VIX) increased 6.3% to close at 17.97. Total weekly share trade volume exceeded 41 billion, marking the biggest weekly total of 2019 so far. Decliners outnumbered advancers on the NYSE by a 1.99-to-1 ratio. On Nasdaq, a 2.07-to-1 ratio favored declining issues.
On Aug 7, the central banks of three major emerging markets —- India, New Zealand and Thailand —- unexpectedly cut interest rates to combat more aggressively against an impending global recession. Moreover, the European Central Bank and Bank of Japan are evaluating options to ease monetary conditions further even though both their economies’ key rates are already in the negative zone.
Consequently, investors across the world are gradually shifting toward safe-haven sovereign bonds from risky assets like equities to safeguard their portfolios from a likely slowdown. At the beginning of 2019, the yield on 3-Month bond was hovering around 2.42% while the 10-year security was yield around 2.66%. As of Aug 9, yield on the 10-year bond plummeted to 1.73% while 3-month short-term government bond was yielding 2.05%. According to several economists, this yield curve inversion foreshadows an impending U.S. economic recession.
On Aug 9, the Department of Labor reported that producer price index (PPI) for final demand grew 0.2% in July, in line with the consensus estimate, surpassing previous month’s increase of 0.1%. Year over year PPI increased 1.7%, flat with June’s growth rate. However, core PPI (excluding the volatile food, energy and trade services items) declined 0.1% in July, marking its first decline since October 2015. Year over year, core PPI rose 1.7% compared with 2.1% in June.
Last week was a disappointing one for Wall Street. All three major stock indexes — the Dow, S&P 500 and Nasdaq Composite — declined 0.8%, 0.5% and 0.6%. Intensifying trade conflict between the United States and China was the main reason for equity market losses. China decided to impose import duties on U.S. agricultural products and its central bank fixed the mid-point of the yuan to below the psychological level of 7 per U.S. dollar over the past three days.
Overall, the bias in prices is: Downwards.
The projected upper bound is: 8,118.91.
The projected lower bound is: 7,624.32.
The projected closing price is: 7,871.62.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 74.2316. This is not an overbought or oversold reading. The last signal was a buy 3 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 41.21. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 48 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -71. This is not a topping or bottoming area. The last signal was a buy 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 17 period(s) ago.
Rex Takasugi – TD Profile
NASDAQ COMPOSITE closed down -95.729 at 7,863.411. Volume was 3% below average (neutral) and Bollinger Bands were 35% wider than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 7,984.81 8,008.63 7,562.66
Volatility: 29 20 26
Volume: 620,074,816 572,999,616 587,683,328
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
NASDAQ COMPOSITE is currently 4.0% above its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect moderate flows of volume out of .IXIC (mildly bearish). Our trend forecasting oscillators are currently bearish on .IXIC and have had this outlook for the last 7 periods.