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US stocks record worst performance in 7 months: is the worst yet to come?

22 Sep 2020 12:09 PM

Markets fears of a worsening pandemic, as well as uncertainty about the stalled fiscal stimulus in the US, have prompted American stock markets to record four consecutive days of losses for the first time since February.

The Dow Jones fell yesterday by more than 500 points, having lost 4.5% of its value since the beginning of September. The S&P 500 fell by 1.2%, down 6% this month, with the Nasdaq 100 down 0.1% yesterday and 8.5% since the beginning of September.

The passage of the fiscal stimulus bill in Washington has been yet more complicated after the death of US Supreme Court judge Ruth Bader Ginsburg, after a period of stalemate that has lasted since July. This is putting pressure on US stocks and impeding their recovery.

Also, bank shares have played a role in the correction, following reports on the movement of illegal funds worth more than $2 trillion moving between a number of international bank. To single out just two, Deutsche Bank shares fell by more than 8% on the news, while JP Morgan shares fell by more than 3%.

Meanwhile, tensions between China and America are on the rise following the US ban on Chinese WeChat and TikTok apps.

Technically, if we looking at the chart of the Dow Jones index futures, we will notice that prices are trading below a resistance area around 27,160 after a bounce from a short-term uptrend line, and continued trading above the 27,000 levels will support pushing prices towards 27,300 and 27,420 levels. The outlook will remain negative as long as prices remain in that range. If it fails to surpass  27160 levels and then declines to break 27000, the door will open for a downside wave targeting the 26,600 / 26,500 levels - and maybe even further.

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