[Click on the picture above to watch Murray analyse the E-mini S&P 500 futures and S&P/ASX 200 futures. The ducks are lining up for a correction in the near future and Murray shows you the levels to keep an eye on.]
US E-mini S&P 500 futures have opened down over 20 points in the overnight market (Monday morning Australian time) with signs that the US–China trade tensions are rising instead of falling as expected.
The extra tariffs have been applied and the current round of negotiations are over. There was some jawboning by Trump on Friday that things are still looking up for a trade deal at some point, and the bulls ran with it to close the market strong after early weakness. But despite the strong close, we still had a weekly sell pivot confirmed.
Incentive to hunt for opportunities to make some money on a correction
Until we see a weekly buy pivot confirmed, I can view price action from a bearish footing and can look for shorting opportunities. The fact that we had a slight false break of all-time highs is an added incentive to hunt for opportunities to make some money on a correction. The market had rallied strongly on the back of the Fed rescuing the market with interest rate cuts and expectations that the US and China would ink a trade deal.
Both of those bullish scenarios have fallen flat for now, so the market looks to have run ahead of itself and is vulnerable to a correction in prices.
ASX 200 is facing an election this weekend
The ASX 200 is also facing an election this weekend that could see a change of government to a high taxing, anti-business Labor government. If I was a fund manager, I would be considering selling a few futures contracts or cutting a few positions to flatten my book early this week.
I mentioned in my update last Monday that the Japanese Nikkei Index looked especially vulnerable in the short term, and since then it has fallen 1100 points or nearly 5%.
The large rally in bitcoin over the weekend tells me that there is money frantically trying to make its way out of the yuan. Where there is smoke there is usually fire, so I think the yuan may come under pressure in the short term which could feed into weakness in Chinese and emerging equity markets.
Editor, Alpha Wave Trader