Stock Market Outlook Cloudy As Volatility Picks Up

Markets were slammed Thursday after receiving word that the U.S. would tack on an additional 10% tariff to $300 billion of Chinese imports starting in September, the S&P 500 Index – INDEXSP: .INX – fell by 0.90%.

All four major U.S. stock market indices now have bearish intermediate postures according to the Market Forecast technical indicator.

All four major U.S. stock market indices also have “3 Red Arrows” signals, largely due to their prices falling below their 30 day moving averages.

All four major U.S. stock marekt indices continue to maintain their “Golden Cross” status using a 10 week moving average versus a 40 week moving average; the Russell 2000 is the most at risk to switching to a “Death Cross”.

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The VIX Volatility Index – INDEXCBOE: VIX – erupted higher by over 10% today and is now trading at its highest level since early June, which could help boost returns for options sellers going forward.

10 Year Treasury yields plunged to 1.89%, which is their lowest level of the year; on the flip side, bond prices in the U.S. and overseas bounced strongly to fresh multi-month highs.

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Stock Market Video – August 2, 2019

Agriculture commodities and crude oil got slammed, despite the U.S. Dollar closing well off of its high; gold was viewed as a relative safe haven.

Stocks in Israel were one of the only foreign markets across the globe that managed to close in the green; EIS maintains its bullish intermediate posture.

Most foreign markets were down substantially with China leading the way lower, down over 2%; Mexico and India have oversold cluster signals.

The sectors of Energy, Industrials, Consumer Discretionary, and Financials all sold off hard in the United States and have bearish postures.

Due to their interest rate sensitivity and their status as a defensive sector, Utilities rose over 1% and have a bullish intermediate posture.

Our trade application example featured buying a long put vertical spread on Netflix (NFLX) now that it switched back to a bearish posture today.

Twitter:  @BrandonVanZee and @Market_Scholars 

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.