Equities sink after negative US session

Asian equities dragged down by Wall Street

Equity markets in New York endured a stormy day, sinking aggressively during the session, only to recoup some of those losses later in the day. It still left all three major indices in negative territory though. The S&P 500 fell 1.16%, the Nasdaq fell 0.13%, and the Dow Jones fell 1.92%, with banks notably under the hammer.

Interestingly, the aftermarket futures on all three indices rallied in Asia this morning but have quickly run out of steam and returned to negative territory. Having been a source of support for Asian markets over the past few sessions, the removal of that supporting pillar sees regional markets following Wall Street into the red today.

In China, the Shanghai Composite has fallen 0.50% with the CSI 300 down 1.0%. Hong Kong has declined 0.70% with South Korea collapsing by 1.80%. Singapore and Taipei are 0.75% lower, and in Australia, the ASX 200 and All Ordinaries are down 1.0%.

The S&P 500, Nasdaq and Dow Jones all approached support at their respective 100-day moving averages (DMA) intra-day, before bouncing into the close. Notably, the Dow Jones 100-DMA at 3,200.00 is also multi-day support. But a daily finish by all or any below their 100-DMA’s should be closely monitored, as it is a strong bearish technical signal.

In Australia, both the ASX 200 and All Ordinaries have now clearly broken their 100-DMA’s with Singapore’s Straits Times testing monthly support between 282.00 and 282.50. Like the Straits Times, the Hang Seng broke its 100-DMA some time ago, and like the Straits Times, is threatening its double bottom monthly support around 23,600.00 today. The story will be much the same for the Nikkei tomorrow when it opens, assuming equity markets say softly. The only bright spot remains China. Both the CSI 300 and Shanghai Composite have been consolidating in broad ranges since early July, and today’s falls leave them comfortably mid-range still.

Given the data-light week, a series of positive headlines could quickly reverse the bearish technical picture evident in equity markets ex-China. However, the tone of the week thus far suggests that investors are looking for rallies to sell, not buy into, with the balance of probabilities implying deeper downward corrections to come. Unlimited zero per cent central bank money, and a world savings glut searching for yield still make the longer-term picture a bullish one, even as harsh lessons on two-way price action prevail in the near-term.

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