European and US futures are trading mixed on the final trading day of the week and ahead of the options and futures expiration date. It is estimated that nearly $3.4 trillion worth of options are likely to expire today, which means stock market may face unusual volatility. In addition to this, today is also the day when are going to experience a rebalancing of the US stock indices, which means single name stocks could see some dramatic moves. The estimated dollar value for the rebalancing of the benchmark indices is to be $55 billion USD.
In addition to this, traders are also concerned about the US debt ceiling, and it appears that lawmakers in Washington are still likely to continue their quarrel over their differences. We have seen several shutdowns of the US government departments due to no timely decisions over the US debt ceiling previously, and there will be no surprise if we see another episode of the same drama again. Of course, in terms of investor optimism, it creates unnecessary tension, which dampens the overall mood.
Something which is also going to keep nervous on the side-line is the next week’s main event, and that is the Fed meeting. It is not likely that traders will take much larger bets ahead of this key event as the outcome of that event is still very much unknown in the light of this week’s economic data.
The Asian stock market traded mostly without any firm direction on the final trading day of the week. The Nikkei index advanced 0.50%. The HSI index increased by 0.51%, while the Shanghai index declined 0.91%. The ASX index also decreased by 1.03%.
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth lost further momentum yesterday. 65% of the Dow Jones stocks traded above their 200-day moving average.
The S&P 500 stock breadth also displayed more weakness yesterday..64% of the shares traded above their 200-day moving average.
Dow Jones Futures Today
The Dow Jones index has traded most of the week below its 50-day SMA on the daily time frame, which confirmed that the bulls are no longer in full control of the price. In addition to this, we have seen the index failing time and time again in breaking above the 100-day SMA on the same time frame which is another confirmation of the above observation. Traders are now expecting the Dow to continue to move lower, especially if we see another negative close for this week. In terms of the RSI, we did see earlier this week the RSI coming off its lows, but it seems like that the RSI may take another nose down over the coming days as the price isn’t supporting any upward moment.
On the intra-day time frame, such as the 4-hour time frame, we are clearly in the downtrend as the price is trading below the 50, 100 and 200-day SMA. The only glimmer of hope will only arrive if the price breaks above the 50-day SMA. One important factor to note on the intra-day time frame is that we do see a negative divergence between the price and the RSI which means that while the price has been making a lower low, the RSI has failed to confirm the same. This means that there is a possibility that we may actually see the selloff coming to an end soon.
The near term support is at 33,847, while the resistance is at 35,082.
Stock Market Rally
The S&P 500 stock index closed lower on Thursday; the index declined by 0.16%. The material sector led the index lower, and 9 out of 11 sectors closed lower.
The Dow index also declined yesterday; the Dow stocks moved the index lower by 0.18%. 22 shares declined, while 7 shares closed higher.
The NASDAQ composite, a tech-savvy index, advanced by 0.13% yesterday.
S&P 500 Leaders and Laggards: ETSY and Freeport
Etsy stock contributed the biggest gain, soaring 3.09%. Freeport stock was the largest drag; it fell by 6.64%. The S&P 500 stock index is up 18.74% so far this year.
Dow Jones Leaders and Laggards: Salesforce.com and Goldman Sachs
Salesforce provided the biggest help for the Dow Jones; it advanced by 1.64%, while Goldman Sachs Inc was the largest decliner, it fell by 1.311%.