Markets crash!
The markets crashed today and for a lot of reasons. The Fed disappointed the markets last week with its suggestion that the .25% rate cut was not likely the start of a series of cuts. Then Trump slaps a 10% tariff on another $300 billion of Chinese goods. Today, China retaliated. First, they announced that they would cease imports of US agricultural products indefinitely, and then the big one. The Chinese central bank let the Yen devalue to 7 per US dollar, the lowest level in over a decade.
As a result the markets took it on the chin. All three major US stock market indexes suffered their worst days of the year today. Both the Dow Jones Industrials and the benchmark S&P 500 index fell nearly 3%, while tech-heavy Nasdaq lost more than 3.5%.
The S&P 500 was down 87.31 or 2.98%. Looking at the Relative Strength Index (RSI) at the bottom of the chart, we can see that the S&P has now dropped below 30 to 28.01, which is technically oversold. That doesn’t mean that it can’t go lower here, but it does suggest at least a bounce is to be expected.
The next key support level is 2750.
The big winners today were the US bonds and gold. At the bottom of each chart we can see that based on RSI both are technically overbought, suggesting that both are due for a pullback soon.
This drop is exactly the kind of move we have been warning about. Is this the start of a big correction or even the actual melt-down? We don’t think so, but it could be and that is the message we are trying to get readers to pay attention to. Whether or not this is the start of a major correction, you need to have a plan for when the melt-down happens.
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Stay tuned!