Here’s a snapshot of things:

• S&P 500 futures -3.0%
• Nasdaq futures -4.6%
• Dow futures -2.1%
• Russell 2000 futures -5.3%

At one point, Nasdaq futures were down over 6% so the rout in tech shares is at least not getting much worse for now. It’s a full-fledged flight to safety mode with traders chasing the usual safe havens. Bonds are bid and so is the Japanese yen and Swiss franc. Besides that, it’s pretty much a sell everything else case in broader markets to start the week.

From earlier:

• Japan’s Nikkei closes down by a whopping 12% to its lowest since November last year
• Volatility is back with a bang
• From soft landing to crash landing
• Poll: Is the Fed behind the curve on cutting interest rates?
• A reminder of the one thing that traders have been getting wrong since last year

This article was written by Justin Low at www.forexlive.com.

The VIX has more than doubled in value today, rising to hit the 50.00 mark now. That’s the highest level since the pandemic and this is the biggest daily jump since February 2018, when there was the whole fiasco involving the XIV and a broader market selloff amid a rout in the bond market at the time.

In any case, the heightened reading we’re seeing above speaks to the fear and angst that is gripping markets right now. For a while there, it looked like we might’ve settled into a period of low volatility. The VIX had before this touch its lowest since before the pandemic as investors were feeling rather confident about broader market sentiment.

How quickly the tables have turned in just one week, eh?

Emotions are running high now and this is a testament to that. The rout in equities will stop when it stops. However, the renewed volatility means that it will at least take a while for the nerves to settle down again. As for market players, it means needing some time to regain their grit and vigour in the short-term.

That translates to a likelihood that we’ll see a more bumpy road in equities moving forward. At least definitely not the one-way traffic in the first seven months this year.

This article was written by Justin Low at www.forexlive.com.

At one point it looked like the worst was behind us as the S&P 500 rallied
almost 3% on a single day following the BoJ and FOMC decisions.
Unfortunately, the following day we got an ugly US ISM Manufacturing PMI which sent the market
into risk-off and defensive positioning into the US NFP report.

The US Jobs report didn’t help as the data
surprised to the downside with unemployment jumping to a totally unexpected
4.3% rate. The losses extended and eventually we got a strong overnight selloff
today due to spillover effects as the Nikkei crashed 12% in a single day.

The market is now pricing in 125 bps of easing by year-end which translates
into a 50 bps cut in both September and November, and a 25 bps cut in December.
The market is even seeing small chances of an inter-meeting cut. Things are
moving quickly.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the S&P 500 broke through the major trendline around the 5435 level where we had
also the 38.2% Fibonacci retracement level for confluence. The sellers piled in more
aggressively as the buyers folded. We are now seeing a bounce on a previous
swing low level around the 5200 level.

This is where we can expect
the buyers to step in with a defined risk below the level to position for a
rally into the 5400 level. The sellers, on the other hand, will want to see the
price breaking lower to increase the bearish bets into the 5000 level next.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we got a fakeout last week when the price broke above the 5540
resistance and then dropped back below it as the US ISM Manufacturing PMI
missed expectations by a big margin. There’s not much else we can glean from
this timeframe as the buyers will just look for a bigger bounce, while the
sellers will look for a break below the 5200 level to extend the drop.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor downward trendline defining the current bearish
momentum. The buyers will want to see the price breaking higher to increase the
bullish bets into the 5400 level, while the sellers will likely keep on leaning
on it to position for a break below the 5200 level. The red lines define the average daily range for today.

Upcoming
Catalysts

This week is basically empty on the data front. Today we have the US ISM Services
PMI and on Thursday we get the latest US Jobless Claims figures. The market
will also pay close attention to Fed members’ comments given the latest
developments.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior -0.2%

Looking at the breakdown, there was an increase in prices for intermediate goods (+0.1%), energy (+1.6%), capital goods (+0.1%), and non-durable consumer goods (+0.1%). The price for durable consumer goods was stable on the month. If you strip out energy prices though, the prices for the total industry would’ve only reflected a 0.1% increase in June.

This article was written by Justin Low at www.forexlive.com.

• Fed: 125 bps (96% probability of 50 bps rate cut at the upcoming meeting)
• ECB: 75 bps (97% probability of rate cut at the upcoming meeting)
• BoE: 53 bps (57% probability of no change at the upcoming meeting)
• BoC: 80 bps (77% probability of rate cut at the upcoming meeting)
• RBA: 46 bps (84% probability of no change at the upcoming meeting)
• RBNZ: 63 bps (64% probability of no change at the upcoming meeting)
• SNB: 48 bps (90% probability of rate cut at the upcoming meeting)

Rate hikes by year-end

• BoJ: 3 bps (98% probability of no change at the upcoming meeting)

(This is an extraordinary update as things are moving very quickly and expectations are liable to big swings in both directions depending on the next developments)

This article was written by Giuseppe Dellamotta at www.forexlive.com.