Sell-off started or just correction?
Wall Street opened lower today as the Chinese stock market sell-off and the US weaker than expected data lead the market emotions!
Despite Yesterday's favorable report of Tesla, and while the market is waiting for Megacap reports, investors are optimistic about the reports, but sell-off in the market leads the way. There are some reasons for that.
Before going into more detail and reasons, I have to mention that the Dow Jones Industrial Average is down by 0.65% at the time of writing, the S&P 500 is also down 0.64%, and the Nasdaq Composite is moving lower 1.3%. It is while all three main-street indices closed Yesterday at record highs, supported by excellent reports which show more than 88% of SP500 listed companies beating the expectations.
While the Chinese sell-off, in the beginning, moved the cash into the US market, however, the market sentiment must be weighing now in Wall Street as well. Chinese regulators started to make strict rules mainly aimed at consumer protection and restructure the online educational application and systems as not-for-profit operations.
On the other hand, in the US, after last week's weaker than expected data, this week so far, we had two critical data from Housing and Manufacturing sectors that confirming the weakness in the US economy as New House Sales and Durable Good orders both have fallen. However, we have a favorable report of CB Consumer Confidence for July that is supposed to limit the market bears ahead of Mega-cap earnings reports.
The market will be more cautious and look carefully at the upcoming reports after the market close. However, Conference Board (CB) Consumer Confidence's published data shows that the level of consumer confidence in economic activity in July rose to 129.1 from 128.9 of the month before.
Between the companies that have published the earning before the market open, 3M and General Electric, both had better than expected EPS, while GE missed the revenue expectations.
And finally, before checking the technical chart to SP500, we have to mention that overall market sentiment is still positive. Still, we need more evidence to say that the market sell-off or crash started, so stay safe and trade carefully, especially if you are looking to short the leading indices.
From the technical point of view, despite earlier fall from an all-time high, SP500 still trading above both 20& 50 Ma lines, with RSI at 55 that supporting the overall uptrend strength. As we can see in the below chart, the first support sits at 4,382; however, just below 50 HMA at 4,353, we can see more supports from market bears towards the next support at 4,290. On the flip side, any return and close above support lines can open the doors for new record highs.