Wall Street experienced a further de-risking, with the DJIA, S&P 500, and Nasdaq all declining. Treasury yields and oil prices continued to be a concern, and the US government funding bill remained gridlocked. The VIX reached its highest level close since May 2023, indicating a risk-off sentiment. The US dollar also strengthened slightly, supported by somewhat hawkish Fedspeak.
US new home sales and consumer confidence data showed downside surprises, indicating moderating growth conditions due to tighter policies. However, it is argued that recessionary evidence is still yet to be seen. Despite this, US new home sales remain in line with pre-Covid levels, and US consumer confidence has not reflected a significant declining trend seen in recessions.
In the Nasdaq 100 index, sellers remained in control as it broke below an ascending channel pattern, reaching a new three-month low. It failed to defend the Ichimoku cloud support and the 100-day moving average last week. The next line of support may be at the 14,200 level, accompanied by the weekly Relative Strength Index (RSI) edging back to retest the 50 level for the first time since March this year. This presents a crucial test for buyers in maintaining the broader upward trend.
Asian stocks are expected to have another downbeat session. The Nikkei, ASX, and KOSPI were already in negative territory at the time of writing. The Hang Seng Index reached a new nine-month low due to increasing concerns over the potential liquidation of China Evergrande. China’s August industrial profits showed a softer decline, but property sector risks remain. Australia’s CPI data came in line with expectations, leaving rate expectations well-anchored for a rate hold from the Reserve Bank of Australia (RBA). However, there is still indecision regarding the need for additional rate hikes early next year. The AUD/USD has been in a ranging pattern, with sellers maintaining control for now.
Silver prices attempted to bounce off an upward trendline support but were limited by higher bond yields and a stronger US dollar. Two consecutive days of losses unwound the gains from the previous week, indicating a potential retest of the upward trendline support around the US$22.60 level. Sustaining above the key 50 level for the RSI would provide greater conviction for buyers. On the downside, a breakdown of the US$22.20 level could lead to a retest of the US$20.60 level.
Overall, Wall Street and Asian markets face various risks, including elevated Treasury yields, higher oil prices, gridlock in the US government funding bill, and concerns over China Evergrande. The US dollar continues to strengthen, and silver prices are being hampered by higher bond yields and a stronger US dollar. The Nasdaq 100 index is under pressure, testing crucial support levels.