Overseas weakness is poised to drag down the U.S. market

2023年12月5日

In the previous post about the SPX, we have been cautioning against potential reversal in the Chinese indices and subsequent implications for the U.S. stock market. Since then, we have seen Hang Seng Index drop about 5% and Shanghai Composite Index about 2%. While these declines are not yet doom and gloom, the situation is worth watching out for in the upcoming days. We expect the Chinese market’s weak performance combined with worsening economic data (globally) to eventually drag down U.S. indices. Therefore, we will pay utmost attention to the release of S&P Global Composite PMI and S&P Global Services PMI today, and the announcement of unemployment rate on Friday. To conclude our views, we are starting to see the current pricing of the SPX as attractive to start dipping a toe in a tiny short position (accompanied by a stop-loss). We will update a our thoughts on the asset witth the emergence of new developments.

Illustration 1.01

Illustration 1.01 shows the daily chart of SPX. The orange line represents Hang Seng Index (continuous futures), and the blue line represents the Shanghai Composite Index.

Illustration 1.02

Illustration 1.02 depicts the Hang Seng Index and Shanghai Composite Index.

Illustration 1.03

The picture above shows the daily chart of SPX. The orange line represents E-mini Nasdaq-100 Futures (continuous). Interestingly, during the summer, the tech sector peaked sooner than SPX (by nine days). As the Nasdaq 100 has been steeply declining for the past four trading sessions, we will be paying close attention to its performance in the following days.

Technical analysis gauge
Daily time frame = Bullish (losing momentum)
Weekly time frame = Bullish
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.

Please feel free to express your ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.