Summary:

• US stock markets have begun their cash session in the green
• US30 looking to recover after sizable decline yesterday
• Soft CPI could aide the recovery

Wall Street has opened in the green for the final trading session of the week as the market looks to recover some of the losses seen following the escalation of US and North Korean tensions earlier this week. Thursday’s session was characterised by a huge spike higher in the Volatility index (Vol.x on xStation) as the US30 experienced its largest daily drop since May. 

 Thursday’s decline in the US30 was the biggest since May. However the pullback has still not even fulfilled the 23.6% fib retracement of the recent rally at 21702. Source: xStation

The drop in the market saw all of last week’s gains wiped off and should price close below 21747 this evening then there will be a bearish engulfing candlestick on a weekly chart. The trade going into the weekend could prove pivotal going forward as if recent low of 21788 can hold then another attempt at all-time highs could well follow. On the other hand if we get further weakness and a drop below 21788 (and even more so a close below 21747) then the recent highs could well prove to be a significant peak. 

It’s quiet on the data front before the weekend with some Fed speak from Kaplan and Kashkari the only events in the economic calendar before the close. Just over an hour ago the latest CPI release showed a slight cooling of inflationary pressures in the US and this will likely add weigh to calls that the Fed will be in no hurry to further raise rates anytime soon. This is supportive of equities but whether it is enough to spark a recovery after the recent drop is yet to be known. Today’s session could well hold the key to answering that question.

Finally, keep an eye out for anymore comments on the delicate US-North Korea situation.