Summary:

• US markets still to open despite bank holiday
• US500 recovered into last night’s cash close
• JAP225 lower ahead of US session; DE30 flat

There’s a bank holiday today in the with the banks closing in observance of Veterans Day. However, both the NYSE and NASDAQ will open as usual at 2:30 GMT and whilst volumes may be slightly lower than an ordinary trading session, what happens in the coming hours could well prove pivotal going forward for global stock markets. 

A spate of selling that hit the JAP225 on Wednesday night spread through Europe and the US yesterday, with notable drops seen in all the major stock indices. The JAP225 did continue lower overnight but as we are a little more than halfway through the European trading day the DE30 is little changed. 

 The US500 experience a fairly large decline yesterday but the market recovered somewhat into the close. Source: xStation

The US500 was lower by the time the US session began on Thursday and reports that the corporation tax cut may not be effective until 2019 saw a swift decline further around the European close. However, the market made a low of 2566 around 5PM and then recovered into the US close. 

 Recent dips in the US500 have been keenly bought and the following day the market has closed higher. Will we see this once more today? Source: xStation

 Today’s session could be particularly key to watch if we get any further weakness or whether Thursday’s decline was a one-off. In the past couple of months there have been only a limited number of drops and importantly each of these dips has been keenly bought. A D1 chart shows that on 3 previous occasions when there has been a significant move to the downside the market has failed to close near the lows and furthermore the following days have always resulted in a green candle. 

Along these lines today’s trade is key, should the low of 2566 hold and the market end higher then Thursday’s decline will likely go down as another small blip in the presiding uptrend. On the other hand a break below here would be a clear negative development and could see a sustained pullback.