Summary:

• US Stock markets reopen after long weekend
• US500 remains below last week’s closing level
• Gap down seen on rising North Korea tensions

US stock markets will  open this afternoon for this first time this week, slightly lower than where they ended on Friday. The reason for the gap seen in the US500 is the escalation of US and North Korean tensions with the latter conducting a Hydrogen bomb test whilst markets were closed. This is the third time in recent weeks that North Korea have deliberately ratcheted up geopolitical tensions, and whilst risk-off flows were apparent the reaction was fairly muted for the US500.

 The US500 gapped lower over the weekend but has seen no follow through lower. A gap fill would occur should price move up to 2474. Source: xStation

The market gapped lower by around 13 points, or just over half a percent, from 2474 to 2461 and has traded sideways ever since. Whilst any gap can signal a strong move in the markets (think post-French election gaps seen in the Euro), this has failed to see any follow through thus far. A break below 2461 would offer the bears a chance to push the market lower but their failure to do so on the back of a potentially major negative news story for this market would reveal an impressive underlying strength.

Longs will be looking for a gap-fill back to Friday’s closing level of 2474 and if this is achieved then they will quickly turn their attention to all-time highs at 2488. There’s little by the way of economic data out this afternoon from the US with factory orders the only one of note, at 3pm (BST).