Today’s Stock Market Drop – What Next?
This day was coming. We couldn’t stay tightly coiled in a triangle consolidation forever. The triangle on the SP500 was forming since September 8th, 2016.
On a day with little economic news, the stock markets took a dive on technical levels, oil output jitters and some Fed speak, closing the day in the red over 1%:
Daily Analysis of Stock Market (SP500 Index)
Here is a daily picture of the triangle break-out.
From this daily stock market chart, we can make a few observations from a technical stand point:
- Break outside of triangle occurred on heavy volume (left chart)
- Despite strong selling throughout the day, the 2,130 level brought out some aggressive buyers around 2:30PM, causing the short-squeeze for the remainder of the afternoon (left chart)
- Day session low of 2,128 touches lower Bollinger Band at 2:15PM EST (top right)
- Despite heavy selling pressure, price rallied back to the 100 moving average by the close, leaving just a wick below the level, with the candle body completely above (lower right)
So Where Does the Stock Market Go from Here?
If only it were that simple. We would all be millionaires, and a loaf of bread would cost a million bucks.
Bank of Japan’s governor Kuroda is speaking to parliament as of 8:36PM EST, and has made some very dovish remarks:
- Will ease by means of lower interest rates if merits are judged to outweigh costs
- Will continue with direction of 80T Yen in JGB purchases
- These measures can be ramped up when needed, and believe will achieve their yield curve target
Equities love to hear stimulus and dovish remarks. Tomorrow they may just get their fair share of Central Bank pumping and priming as we have two speakers on the docket out of the US:
- Dudley speaks at 8AM EST
- Esther George speaks about the “Payments System” in Chicago at 9:40AM EST
- Federal reserve releases their meeting minutes from Sep 20-21 FOMC meeting at 2PM EST
Don’t be surprised if the stock market finds its way right back up to the 2150 to 2160 level, where it will likely be met with significant selling pressure. Remember, the majority of equity gains in the past few years have happened in the Asian and European market sessions, and stayed flat to lower during the US trading hours.
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