- Stocks on Wall Street fell sharply on Friday, led by banking stocks due to a sharp pullback in Treasury yields, as part of the yield curve inverted, underscoring concerns about a possible recession amid slowing global economic growth.
- Weaker-than-expected German PMIs, coupled with poor Eurozone data, renewed fears the euro zone may be heading for a recession. Federal Reserve had earlier trimmed its US GDP growth forecast which rekindled worries of an economic slowdown and increasing concerns of a global recession.
- Global bond yields added to the week’s steep losses on Friday as bond traders lost confidence in the strength of the U.S. and global economies just days after the Federal Reserve downgraded its own forecast. An inverted curve is also considered a recession indicator.
- Asian market declined following Wall Streets’ footsteps with Nikkei 225 index falling more than 2%. The reason for the decline was fears that an economic recession was on the horizon due to an inverted yield curve.
- Despite the decline on Friday, stocks are still up sharply for the year. The S&P 500 and Nasdaq are up 11.7 percent and 15.2 percent, respectively. The Dow, meanwhile, has rallied 9.2 percent. Hang Seng Index is up 12% and Nikkei is up 5% YTD.
Dow Jones Index
(CFD Symbol: US30)
Trend : Bearish
Recommendation : Short
Last : 25,450
Target price: 25,250
Protective stop: 25,600
On Friday night, price declined on concerns of a possible recession on the horizon. The decline does not look completed. There could be another decline to 25,260. Momentum is on the low side but MACD is still bearish. 20EMA is indicating a strong bearish trend. Fibonacci 161.8 price target is at 25,260.
Look to sell if price moves towards resistance near 25,600 for a decline to 25,250 to complete a possible decline.
Hang Seng Index
(CFD Symbol: HK50)
Trend : Bearish
Last : 28,647
Price declined this morning following Wall Street’s footstep. Momentum oscillators are near to their extreme and could be turning around. We have to watch for confirmation of this turning. The gap created this morning must not be closed or it would mean a corrective rally to the 20EMA at 29,000.
Watch the gap for confirmation of trend direction. If price goes above 28,716, go long. If price stays below 28,716, it is most likely to test the low at 28,450 again.
Nasdaq 100 Index
(CFD Symbol: USTec)
Trend : Neutral
Last : 7279
Target price: 7215
Price has declined but it is still above the Fibonacci 50% correction point. This decline could be a correction and may not be a bear market. We will have to watch the last Fibo support at 7148. MACD is still bullish but has shown a bearish divergence warning. Stochastic is moving lower but has yet to enter into oversold extreme.
Watch the reaction at 7215 for clue to trend direction.
Nikkei 225 Index
(CFD Symbol: JP225)
Last : 21,055
Protective stop :
Price broke below the support at 21,125 and should be heading towards the previous low at 20,845. MACD has turned bearish and Stochastic looks weak. Both momentum oscillators are hinting of further decline. A break of 20,845 would be bad and is a hint of more decline.
Short term trade idea would be to sell near 20,960 for a test of the low at 20,845.