Market Morning Huddle – Global Slowdown Fears – 8 Feb 2016

News Driver: Global economic slowdown continues to worsen. Investor fear is rising and VIX levels remain elevated.

$VIX as measured by VXX short term VIX futures is set to open higher this morning with a 27.50 reading nowhere near a panic level but a good measure of the overall concern in the markets.

U.S. stocks are coming off Friday’s massive tech-led selloff that pushed the Nasdaq to its lowest close since October 2014. Tech stocks were again among the top losers in pre-market trading on Monday.

S&P Futures: -1.2%
Nasdaq Futures: -1.9%
Dow Futures: -1.1%
Oil Futures: -1.5%

Today’s action is a STRONG FORM RISK OFF (higher risk assets being sold with money flows to defensive assets) it is transitioning to a weaker-form risk off as we get closer to the cash open of 9:30am EST. Markets have formed a base and moved up slightly.

S&P 500: It may seem like the markets are “breaking down” here however, pre-market action on the S&P 500 is negative (-1%) but holding support and basing. There is leadership on the down-side from momentum spaces (Nasdaq –1.7%), however the Russell2K is down in tandem with the S&P 500. As we get closer to the 9:30am (EST) open equity markets are decelerating in their declines.

Anticipate the S&P 500 to open below major support of 1,880-1,870 but hold above 1,850-1,842 with better odds of re-gaining a foot hold above 1,880-1,870 this week, the market remains setup for higher attraction to higher risk spaces and departure from defense in the short-term but we know that in the long-term markets have broken long-term up-trends.

TSX: likely to remain under resistance of 12,810-12,755 but likely hold support of 12,547-12,497

Bonds/Gold: Gold is up 2.1% as fear and the flight to safety trade is on. Gold is expensive on a relative basis and has become extended in the short term.

TLT is up +0.91% (8:01am) as the markets are set to open strong form risk off and lower risk assets catch a bid. Bonds are dislocated and expensive versus Equites but are likely to continue to outperform stocks as the market struggle.

Oil: $29.74 (7:56AM): Levels to watch are $29.38 support. Oils has broken down again hourly support is around $29. If that breaks a move to the lows (or a new low) is likely.

Economic Calendar: Nothing of major significance today. Wednesday at 10am Yellen give a speech

For a review of the rest of today’s economic data visit the economic calendar here.

Earnings: Todays stock to watch are Hasbro $HAS, Yelp $YELP and Twentieth Century FOX $FOXA

For a complete list of today’s earnings visit the earnings page on our site.