Last Week's Close
E-mini S&P 500 Futures (September): Settled at 4421.75, down 42.50 on Friday and 27.25 on the week
E-mini Nasdaq-100 Futures (September): Settled at 15,326, down 183.50 on Friday and 108.00 on the week
Stock indices around the globe are down sharply and will put the “buy the dip” narrative to the test ahead of Wednesday’s FOMC policy meeting. There are 3 punches here the market is absorbing: uncertainties and fears of contagion relating to the Evergrande fallout, the S&P’s close below the 50-day moving average on Friday, and deadlock in Washington.
The Hang Seng finished down 3.3% today, the lowest level in a year. Although the impact of Evergrande has pulled down the entire developer space within China, it appears increasingly unlikely there’s significant exposure within the U.S.
After a whipsaw week, U.S. benchmarks finished Friday at their worst levels and this pinned the S&P below 2 critical technical indicators, the 50-day moving average and trend line going back to March of this year. Furthermore, U.S. Treasury Secretary Janet Yellen has stoked already-mounting fears that the U.S. won’t be able to pay its debt come October if Congress doesn’t raise or suspend the debt ceiling.
The news flow will collide with a policy announcement from the Federal Reserve on Wednesday. The bank has taken an ultra-patient path and now, given these 3 punches, there’s absolutely no reason for the committee to announce or telegraph a taper at the upcoming meeting. We’ve expressed it already; it’s possible they missed their window over the summer.
At the end of the day, we could see a dovish Federal Reserve and an RRR cut from China this week, and Washington coming together over the next 2 weeks to bring an added tailwind.
Interested in our technical perspective? Please sign up to have Blue Line Futures technical outlook, actionable bias, and proprietary levels emailed to you each day.