US stock markets were closed on Monday for a public holiday, but equity futures opened lower today amid ongoing geopolitical tensions. Both the Dow and the S&P 500 futures lost more than 1%, and Nasdaq futures fell more than 2% in the first hour of trading.
While the ongoing Ukraine crisis weighs on the market sentiment, will there be a rebounding opportunity in the coming days as the major US indices approach January lows?
Markets may find relief before US and Russia meetings
The US secretary of state Antony Blinken and Russian foreign minister Sergei Lavrov agreed to meet to discuss the Ukraine crisis later this week. Blinken said the meeting is on the condition that Russia will not launch an attack on Ukraine. Also, despite fading hope for US president Joe Biden and Russian president Vladimir Putin to meet in a summit aiming to de-escalate the tension, markets may find a short peaceful time ahead of these planned meetings.
Fed policy may not be as aggressive as priced in
On Monday, Federal Reserve governor Michelle Bowman said she would continue to assess incoming economic data before deciding on the percentage of a rate hike in the March meeting. She also said the Fed’s balance sheets need to be reduced to curb 40-year high inflation, but didn’t give a timeframe. The comments are less hawkish than markets have expected in the last few weeks. The US PCE data to be released this Friday is a key economic gauge for investors to assess inflation.
According to the CEM Fed Watch Tool, the probability for a 25-50bps hike in March is 82.8%. Fed chair Jay Powell will speak before Congress on 2 and 3 March, and is likely to indicate the next interest-rate move.
Nasdaq - Daily chart
- Nasdaq is testing on the key support at the January low, 13,700, trying to find a double-bottom pattern to establish its reversal course at the lower band of Bollinger Band
- The Historical Volatility Index falls from the 80.00 mark, indicating a potential rebounding speculation in play
- RSI touches on the lower range at 30.00%, heading into an oversold territory
- The lagging indicator, MACD forms a dead cross, which is not a convincing signal for a solid bounce ahead
The pivotal supports: 13,700, 13,000
The key resistances: 14,400, 15,000
S&P 500 – Daily chart
- The Historical Volatility Index points down, indicating a potential rebounding at the January low at 4,220
- Stochastic falls into the oversold territory, but not convincing enough for an imminent reversal
- MACD forms a dead cross, waiting for more signals to reverse the downtrend course
The pivotal support: 4,220
The key resistance: 4,444
S&P 500 VIX futures - March chart
- The VIX futures approach to the 30.00 mark, which is a resistance level and indicating a potential near-term pullback
- RSI points down, which may indicate uncertainty fades in the near term supporting a potential rebound in the S&P 500
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