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XTB TRADEBEAT

Stocks under pressure ahead of US session

Summary:

  • US indices in the red ahead of Wall Street open
  • European markets experience sizable declines in the morning
  • China to lose trade war vs the US?

It’s not been a good day so far for stock market bulls with some pretty sizable declines seen. European markets are more than halfway through their cash session and there’s a sea of red across the larger bourses on the continent with the ITA40 the worst hit and lower by more than 1.5% and the DE30 experiencing a decline of more than 1% in falling back near last month’s low around 12550. 

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 The DE30.cash is retesting prior support around 12550 with a break below here paving the way for a larger decline. The market has failed to close the gap lower from 12860 seen overnight on Monday and a failure to do so today would mark 3 days trade since the gap, which by some definitions fulfills the criteria for a breakaway gap.  

 US indices are holding up slightly better but if they follow Europe’s lead this afternoon then we could be set for a move lower. The recent trade tariff talk has weighed on risk appetite and there’s been a notable divergence in the last couple of months between Chinese and US tech stocks. With the Nasdaq (US100 on xStation) outperforming its Chinese equivalent it appears that the market is of the belief that the US will outperform tech wise. 

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 US tech stocks have outperformed their Chinese peers in recent months with the market seemingly of the opinion that an escalating trade war between these two will see US tech outperform. Source: Bloomberg

The broader Chinese index (CHNComp on xStation) fell overnight to its lowest level of the year and there are growing signs that the uptrend seen since the Chinese hard landing fears in late 2015 and early 2016 is under threat. Price almost double from a low of around 7500 to this years high of 13950 but after a period of consolidation it appears that price may now be turning lower. 

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 The CHNComp has broken a rising trendline datnig back to the start of 2016. Source: xStation

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 CHNComp has also moved back below its 200 day SMA for the first time in 2 years and there are growing signs that this market could be turning lower after a strong rally. Source: xStation

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