US stock markets deep in the reds

Peter Iosif, ACA, MBA IronFX

US stock markets, deep in the red

US stock markets tumbled yesterday as market worries for the AI sector resurfaced. The market had already been worried about the high debts of high-tech companies, to boost CapEx required for the development and implementation of AI technology. Given also the sweep of the Democrats in the midterm elections, expectations for increased scrutiny and regulation on AI, which may curtail their revenue and activity, were enhanced, leading market participants to express their worries with a sell-off. We continue to view fundamentals as weighing on tech shares, given that the market’s worries remain unresolved, and despite some correction higher, we may see the bearish tendencies persisting.

October’s US employment report also in focus

In the US we highlight the release of the US employment report for October. The unemployment rate is expected to remain unchanged and the NFP figure to rise, signalling a possible tightening of the US employment market. Should the data show a tighter-than-expected US employment market, especially should the NFP figure rise more than expected, we may see the USD getting some support while gold’s price could slip, as the market’s expectations for the Fed to tighten its monetary policy may be enhanced. At the same time, north of the US border we also get Canada’s employment data for the same month, and a possibly tighter-than-expected Canadian employment market may lift the Loonie and vice versa.

Oil prices correct higher

Oil prices corrected higher yesterday and during today’s Asian session, given Wednesday’s sell-off. On a fundamental level, concerns for Middle East supply uncertainty seem to have stabilised the commodity’s price for the time being, and we are still on alert for a possible intense but short US military action that could push oil prices higher.

Other highlights for today

In today’s American session, we also get the preliminary UoM consumer sentiment for November and Canada’s Ivey PMI figure for October, while St. Louis Fed President Musalem, BoJ Governor Kazuo Ueda and Fed Vice Chair Bowman are scheduled to speak. On Monday’s Asian session, RBA’s Assistant Governor Hunter is speaking while we note the release of China’s October inflation metrics. In the European session we get Germany’s trade data for September and Euro Zone’s Sentix index for November.

Charts to keep an eye out

Nasdaq tumbled yesterday, possibly in tis worst post pandemic week, breaking the 27050 (R1) support line, now turned to resistance. The bearish outlook is maintained yet the index’s price action seems to have reached oversold levels and has also broken below the lower Bollinger band, triggering a correction higher. Should the bears maintain control over Nasdaq, we may see it aiming if not breaking the 25375 (S1) support line. For a bullish outlook, which we currently view as remote, we would require Nasdaq breaking the 27050 (R1) line, breaching also the 28750 (R2) resistance level and open the gains for the 29735 (R3) level.

USD/CAD’s price action, rose decisively breaking the 1.3990 (S1) resistance line, now turned to support. Despite the bullish tendencies of the pair we also note that the RSI indicator has risen nearing the reading of 50, erasing the bearish market predisposition, yet still short of signalling the generation of a bullish market sentiment. We maintain a bias for a sideways motion currently yet also issue a warning for the bullish tendencies of the pair. Should the bulls maintain control over USD/CAD’s price, we may see it aiming if not breaking the 1.4125 (R1) resistance line. Should the bears take over, USD/CAD may break the 1.3990 (S1) support line and start aiming for the 1.3880 (R2) level.

US 100 cash daily chart

Support: 25375 (S1), 23965 (S2), 22800 (S3).
Resistance: 27050 (R1), 28750 (R2), 29735 (R3).

USD/CAD daily chart

Support: 1.3990 (S1), 1.3880 (S2), 1.3730 (S3).
Resistance: 1.4125 (R1), 1.4245 (R2), 1.4410 (R3).

Author

Peter Iosif, ACA, MBA

IronFX

Mr. Iosif joined IronFX in 2017 as part of the sales force. His high level of competence and expertise enabled him to climb up the company ladder quickly and move to the IronFX Strategy team as a Research Analyst. Mr.

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