Summary:

• Equities plunged on Monday as bond yields soared
• Investors are undecided on Tuesday, recovery is just partial
• We take a look at charts of US30, US500 and DE30

Monday brought a panic sell-off on Wall Street that saw the Dow plunging by over 6% at the lowest point and closing at -4.6%. The gloom spread to Europe with the Dax futures seeing a similar crash and S&P500 futures heading towards the lowest levels since October. The main reason behind the bloodbath was a rise in bond yields as investors started to worry about an impact of more restrictive monetary policies on the global economy and equity markets. It remains to be seen if these higher bond yields cause some actual damage in the near term and inflict a longer-term bear market. For now we take a look at the three major indices and crucial levels on the charts. 

US30

The Dow Jones Industrial Average was at the epicenter of a bloodbath on Monday so we start from here (US30 is based on DJIA futures). As we may see on the chart a sell-off was halted exactly at the 38.2% retracement of a post-Trump rally. We can also see a consolidation just above this levels (from October) so we can treat it as a decent support. However, there are similar junctures at 50% retracement (22000) and 61.8% (20950) so bulls must do a hard work and defend the 23100 support. We can see the RSI at a low point just below 30 but then again, we’ve not seen a plunge like this for a while so one should treat this indication with caution. 

A decline on US30 stopped at 38.2% Fibo… for now. Source: xStation5 

US500

When we look at the weekly interval of the US500 (S&P500 futures underlying) the last two candles (the second one is still in the making) are the largest in the whole bull market. This does not look well. Analyzing previous corrections they all ranged between 14.2 and 17.2%, averaging 15.5%. A decline like this would take the US500 to 2431 points. 

An average of previous 4 corrections was 15.5% decline. Source: xStation5 

DE30

DE30 (DAX30 futures underlying) chart is a bit more complex. We remain well within a long term upwards channel and we could have seen a corrective wave 4. A final wave 5 is missing in this Elliott structure but as we may see bull need to defend the psychological 12000 barier if they are about to make a strike. A lower limit of a long-term channel runs at around 10500 points.  

The final wave 5 is still missing on the DE30 chart. Source: xStation5