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Stock Futures Trade Lower, Here Is Why

Stock Futures Trade Lower, Here Is Why

Stock Market Breadth

US and European futures are trading flat as bargains hunters are stepping in today for two main reasons. Firstly, the US stock indices recorded their worst day, a drop of over 500 points for the S&P 500, for this year, yesterday. Secondly, it appears that there will be a meeting between the US and Russian officials over Ukraine. Basically, the moment we get any signal of geopolitical tensions easing off, we see traders backing riskier assets, and the reverse is also true. A move closer to war, would see investors once again backing off away from risk.

Fund Inflow Remains Strong for Chinese Stocks                                                                                                             

Even as local investors have remained hesitant on the mainland markets in China, global investors are pouring more money into Chinese stocks.

According to research firm EPFR Global, Chinese stock funds had net inflows of $16.6 billion in January, marking only the fourth time since the epidemic that monthly inflows have exceeded $10 billion. According to the figures, net inflows totalled roughly $11 billion in December.

Forex

If there is one currency that has been known for its volatile moves and making headlines last year, it was the Turkish Lira. Once again, the Turkish Lira is back in the headlines as Turkey’s President Erdogan Tayyip has made a pledge to free his country from the shackles of interest rates. Yesterday, the Turkish Central Bank announced its monetary policy decision, and it matched the market’s expectations of not changing the interest rate. However, the Turkish Lira dropped after the announcement yesterday. The chances are that we may see a further slide in the Turkish Lira because of the renewed pledge from President Erdogan. It is important to point out that the central bank in Turkey has already slashed interest by 500 basis points since September. President Erdogan believes that he can bring Turkey’s inflation to a single-digit number.

We also had the US unemployment claims number (actual 248K, forecast 217K) yesterday. Remember, earlier this month; we saw a massive improvement in the US NFP data when market players were expecting that number to be weak.

Nonetheless, the dollar index itself has lost some momentum this week. Most of the weakness for the index has happened after the FOMC minutes that showed a more dovish Fed than previously anticipated.

Cryptos

Bitcoin is still lacking full bull momentum as the price is struggling to break above 45K, which opens the gateway for the price to move towards its actual resistance of 50K – the number everyone is watching closely. In terms of fundamentals, there is no doubt that Bitcoin and cryptos are experiencing a lot stronger adoption than in previous years. We believe the fact that companies like Uber and Airbnb are going to accept cryptos soon is a significant positive factor.

Asian Markets 

The Asian stock markets are trading mostly lower on the final trading of the week. The Nikkei index decreased 0.51%, the Shanghai index fell by 0.05%, while the HSI index dropped by 0.55%. The ASX index plunged 0.59%.

Dow Jones and S&P 500: Market Breadth

The Dow Jones’ market breadth lost more momentum during the last session. 58% of the Dow Jones stocks traded above their 200-day moving average. 

 The S&P 500 stock breadth also confirmed weak momentum. 53% of the shares traded above their 200-day moving average. 

Dow Jones Futures Today

The Dow Jones futures are trading lower today. In terms of economic data, investors will be looking at US Existing Home Sales which will hit the tape at 15:00 GMT today. The forecast for the Existing Home Sales number is 6.10M which is less than the last reading of 6.18M. we also have the G20 meeting taking place all day today as well.

In terms of technical analysis, the Dow Jones futures continues to trade below its all three important moving averages which are 50, 100 and 200-day SMA. On Feb 11th, the Dow made a double top–a bearish patten, and this continues to complete its downward projection. The most important price level is at 34,202 which is the low formed on Feb 13th. If the price continues to respect this support zone, there is a possibility that the Dow may once again break above its SMAs mentioned above. Overall, bears are likely to control the momentum as the price is trading below 50, 100 and 200-day SMAs on the daily time frame.

As for the RSI, it continues to consolidate and is trading away from its overbought (70) and oversold zones (30). Currently, the RSI is trading at 41.

The near-term support for the Dow is at 32,817, while the resistance is at 35,737.