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Risk-Off at the Beginning of the Month, Volatility Breaks the Limit

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USA100, Daily

Major stock markets in the United States ended Thursday’s session in positive territory, after a very volatile session with the latest batch of economic data. Manufacturing activity slowed to its lowest level since July 2020, fewer people filed for unemployment over the past week compared to the previous week. In the closing hours, the Dow Jones was up 0.46%; S&P 500 up 0.30% but the Nasdaq 100 has barely changed, pulled down by Nvidia and AMD’s declines driven by new export rules.

Recently, the US ordered Nvidia and AMD to stop shipping AI chips to China, a measure meant to limit the military capabilities of China and Russia. As a result, the market responded with a complete fall in the technology sector.

US chipmaker stock retreated on Thursday. Nvidia closed down more than -7%, and ASML Holding NV closed down more than -4%. In addition, Advanced Micro Devices and Applied Materials closed down more than -2%, while Qualcomm, Broadcom and Marvell Technology closed down more than -1%.

Apart from concerns about inflation and rising interest rates stifling growth, concerns over the health of the Chinese economy have also played a big part in the moves we have seen in recent days. August manufacturing PMI data showed contraction as zero-Covid policy, energy issues, housing sector issues and lockdowns add to the gloomy story. AUD and NZD are probably the most affected by this rising negative sentiment. In Thursday’s trading, AUDUSD is seen weakening -0.79% and NZDUSD -0.67%.

The technology sector has been weakening for a while, following hawkish verbal intervention last week and this week. Now the market is pushing expectations for a 75bp rate hike from the Fed back above 70%. Another strong jobs report could reinforce those expectations further.

Technical Overview

USA100 seems to have found new footing at 12,009 in Thursday’s trading. There has been some liquidation going on and the market looks to be bracing itself for Friday’s jobs report. The bearish structure on USA100 temporarily bounced at the 61.8%FR level, from a pullback low of 11,035 and 13,722 peaks. On the upside, the 12,800 level which is the neckline of the head and shoulder pattern should limit the rally, while a break below 12,009 will bring a test of the 11,481 price and the 11,035 low. However, the outlook will remain bearish as long as the resistance at 13,722 holds.

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Ady Phangestu

Market Analyst – HF Educational Office – Indonesia

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