Asia follows Wall Street south

 US stocks slide, Asian markets in red

Wall Street suffered steep falls overnight, as investors appeared to accelerate their move into cash awaiting further developments on several fronts. The S&P 500 finished 2.37% lower, the Nasdaq slumped by 3.02%, and the Dow Jones fell 1.92%.

Despite small gains in US after-market index futures this morning, on short-term profit-taking, Asia has refused to follow the playbook of the past week, with regional bourse all in the red. Japan has fallen 0.65% with South Korea down 2.15%. Mainland China’s Shanghai Composite and CSI 300 are both down 1.0%, with Hong Kong down 2.0% and Singapore down 1.0%. The fall in the Australian dollar overnight has given no solace to local markets with the ASX200 and All Ordinaries 1.0% lower.

The falls overnight and today have left quite a few significant indices precariously placed from a technical perspective. The Hang Seng is at 31/2 month lows this morning, with the Straits Times set to test 6-month support at 280.00. The Nikkei, Shanghai Composite and CSI 300 have edged towards the lower end of their three-month ranges, although no downside break is yet confirmed.

The S&P 500 is nearing critical monthly support at 3,200.00, near the July lows and also now its 100-day moving average (DMA). A close below 3200.00 sets up further losses to the 3,000.00 region. The Nasdaq is approaching its 100-DMA at 10,560.00, just ahead of its July lows around 10.400.00. A close below the later signals more losses towards 9,600.00, its 200-DMA. Notably, the Dow Jones is has traced out a bearish head and shoulders formation, and is testing the neckline at 26,660.00, just ahead of its 100-DMA. A failure targets a further loss to 24,000.00.

The harsh dose of Covid-19 reality, a situation I have mentioned extensively as a significant risk factor to the buy everything trade, and US government fiscal impotence will keep equity markets on the back foot throughout the Asian session and into Europe. Another gloomy day on the scale of that seen on Wall Street overnight will trigger medium-term sell signals around the world.

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