A big warning sign is occupying the minds of investors as a new wave of the virus in China emerges. City-wide testing in Shanghai and Beijing have been going on for the past couple days. Investors fear another potential lockdown in these cities. This is not just impacting the Chinese economy but global indices as well.
Global Indices Plunge
SPX500, NAS100, UK100, and NI225 are all down today while NAS leads in the losses and is down 2.68% at the time of writing this. If China were to announce another lockdown, stock markets around the world would continue to tumble. Another problem facing US stocks is a mixed earnings season. This factor paired with a shift in money to bonds adds to the overall bearishness.
Very little open interest on the COT side also suggests that we are not yet ready to see stock market gains for the time being. What's happening now is a myriad of headwinds in the way, and the market can't really cope with everything going on. An alarming rise in uncertainty usually results in sporadic behavior and eventual sell-offs. It looks like the bearish sentiment will likely continue until we get past quarterly earnings and concerns in China ease.
Setups To Watch
SPX500 fails to shift in direction after yesterday's bullish hammer candle. It looks like price will eventually fall to support around $4181 where there is a double bottom on the 1D. However, if by the end of the day the index shows another day of rejecting the lows, we might see a higher low established.
NAS100 is in the same boat except yesterday's gains were erased just from this morning's performance. What we could see is a rebound at the double bottom as rejection from the lows would be bullish on a technical perspective. However, if price cannot maintain above this level, we could see a fall to the $12,600s.
This is very much looking like a short setup on the 1D. Price has already crossed under the 50 DMA and heading lower towards the 200 DMA. Price action suggests that the index will hit the 200 before it finds any clear support. Lower highs also suggest that price is not done with its bearish move.
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