Opening Bell: U.S. Futures Struggle To Ride Out China Worries; Gold Sells Off

March 5, 2019

Frankfurt (Mar 5)  Futures on the S&P 500, Dow and NASDAQ 100 and European shares struggled to gain ground this morning following a mixed Asian session, as the market weighed the potential impact of tax cuts and a lower growth outlook in China amid growing hopes for a trade deal.

The STOXX 600, initially falling alongside automakers, rebounded with telecommunications but later resumed its decline. Technically, should prices tick higher, they would advance for a fourth straight day. Right now, the uptrend needs to prove it can overcome the presumed resistance of Monday’s shooting star. Meanwhile, the 50 DMA crossed over the 100 DMA, as the more recent price average has improved over long-term pricing.

In the earlier Asian session, China’s Shanghai Composite (+0.88%) climbed for a third straight day as trade optimism as well as $298 billion in tax cuts and infrastructure spending plans to boost growth—unveiled by government officials on Tuesday—offset weaker growth forecasts and the “hard struggle” ahead Premier Li Keqiang warned against at the opening of the parliament's annual meeting.

Technically, the 50 DMA is over the 100 DMA, but today’s price action failed to overcome yesterday’s potent shooting star, whose upper shadow was exceptionally long. Yesterday’s price reached the highest level since June on trade hopes. Bears pushed back, forming the shooting star, on slower growth expectations.

The question is whether the newly-announced tax cuts will materialize into growth and whether trade talks will yield a substantial deal. If they do, it will become clearer whether the trade war was the critical headwind it was characterized to be in the market's narrative. The inconsistencies we have been discussing for months—including, in times of improving trade outlook, small caps outperforming instead of lagging and Treasurys and gold gaining ground instead of edging lower—have raised a red flag.

Hong Kong’s Hang Seng (+0.01%) found support on the 10 DMA to barely close in green territory. Except for a single lower close on Feb. 15, the MA supported price since scaling higher on Jan. 7. After the 50 DMA recently crossed above the 100 DMA, it is nearing the 200 DMA. On the other hand, yesterday’s shooting star confirmed Feb. 25th’s hanging man, authenticated the next day with a close that encroached into the long, green candle two sessions earlier.

Japan’s Nikkei 225 (-0.44%) filled half of yesterday’s rising gap, which closed as a high-wave candle.

South Korea’s KOSPI (-0.52%) dropped for a third day, as North Korea leader Kim Jong Un returned home from the failed U.S.-NK summit, which stepped short of yielding any nuclear agreement and, by extension, to reduce uncertainty in the region. Technically, the price found resistance by the 200 DMA, even after the 50 DMA crossed above the 100 DMA. That MA interplay—an apparent price acceleration turning into a deceleration—is typical of a market top, as can be visually represented by a potential H&S top in the making.

Australia’s S&P/ASX 200 retreated 0.29% from a four-day straight advance.

Global Financial Affairs

In yesterday’s U.S. session, stocks sold off as impatient investors became less optimistic about a trade war resolution due to the lack of details on the reported U.S.-China deal.

Silver Phoenix Twitter                 Silver Phoenix on Facebook