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Dow Jones crumbles on Wall Street. ASX 200 and Hang Seng Index risk following lower

Volatility roiled Wall Street to start new week as Dow Jones sank; worst weekly consecutive losses since 2002 could be in the cards and ASX 200 and Hang Seng Index appear vulnerable for APAC trade.

Source: Bloomberg

Volatility roiled Wall Street to start new week as Dow Jones sank; worst weekly consecutive losses since 2002 could be in the cards and ASX 200 and CSOP Hang Seng Index Daily 2x Leveraged Product appear vulnerable for APAC trade.

Tuesday’s Wall Street trading session recap

Market volatility roiled Wall Street to start off the new trading week, posing a threat to the incoming Asia-Pacific session. All three major benchmark stock indices closed in the red, with futures tracking the Dow Jones, S&P 500 and Nasdaq 100 sinking -1.98%, -3.2% and -3.95% respectively. If all 3 of them end this Friday lower, this will be some of the worst consecutive weekly declines since 2002.

There were few escape paths in the market. In the table below, the 3 worst-performing sectors within the S&P 500 were energy (-8.3%), real estate (-4.62%) and consumer discretionary (-4.26%). Specific economic events that may have driven the sharp dive were notably absent. Some newswires were citing a higher-than-previous survey of inflation expectations released by the New York Federal Reserve.

Likely, traders are continuing to face a difficult fundamental environment for risk assets. The Fed is just about to begin unwinding its almost USD 9 trillion balance sheet and inflation continues to run around 40-year highs. Meanwhile, China’s economy is slowing amid a strict zero-Covid lockdown strategy that risks exacerbating global supply chains. Traders are also bracing for this week’s latest US inflation report.

Dow Jones technical analysis

On the daily chart, Dow Jones futures have plunged into the critical 32521 – 31951 support zone. This marks the lowest close since March 2021 and is just shy of a 13% contraction from the December record high. A confirmatory daily close lower could open the door to extending losses towards lows from March 2021. A turn higher places the focus on a near-term falling trendline from late April.

Dow Jones daily chart

Source: TradingView

Tuesday’s Asia-Pacific trading session

The Tuesday Asia-Pacific economic docket is fairly light, placing the focus for traders on market sentiment. The Volatility seen from the Wall Street session risks permeating over, placing regional indices, such as Australia’s ASX 200 and Hong Kong’s Hang Seng Index, at risk. Government bond yields have generally been rising with inflation expectations. Risk aversion could send bond prices higher as yields decline.

ASX 200 technical analysis

The ASX 200 has been on an aggressive decline since late April, with the latest close bringing prices down to lows from March. The index also took out a rising trendline from late January, opening the door to extending losses. Clearing immediate support, the 100% Fibonacci extension at 7007, exposes the 6747 – 6894 zone below.

ASX 200 daily chart

Source: TradingView

Hang Seng technical analysis

The Hang Seng Index is now back to the April low, which held as support at 19625 over the past 24 hours. A daily close under this price opens the door to revisiting the March low, which is also closely aligned with the 2016 bottom. In the event of a turn higher instead, keep a close eye on the falling trendline from February. It could reinstate the downside focus.

Hang Seng futures daily chart

Source: TradingView


This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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