Opening Bell: Dollar Weakens; Gold, Yen Trim Gains; Bitcoin Surges

Key Events

Yesterday's tech selloff on Wall Street sounded alarm bells this morning across Asian markets. With three key technical signals triggered (more on that below), the possibility of a deeper correction moves to the forefront.

The Stoxx Europe 600 retreated, ending a three-day advance for the index, which failed to rise on a rebound in Asia that erased most of the earlier losses there. At the same time, safe haven assets such as the yen, gold and Treasurys gave up some gains.

S&P 500 Futures are currently fluctuating between gains and losses, displaying traders' indecisive mood right now.

Global Financial Affairs

Benchmarks across Asia, including Japan’s TOPIX, South Korea’s KOSPI and Australia’s S&P/ASX 200, almost erased earlier losses but remained lower than the previous session’s close. Chinese shares bucked the trend. The Shanghai Composite kept most of its losses, while Hong Kong’s Hang Seng rebounded into an advance.

These mixed signals—the pared losses but with a retreat nonetheless in Asia, along with Europe’s failure to build on the upside momentum in late Asia trade, as well as indecisive US futures—demonstrate a lack of market leadership at a crucial crossroads. This may determine the next primary trend.

Yesterday’s US market selloff—the Dow lost 1.90 percent, the S&P 500 closed 2.23 percent lower while the tech-heavy NASDAQ Composite was the hardest hit, dropping 2.74 percent—triggered three technical signals:

1. The S&P 500 closed below its uptrend line since the February 2016 bottom.
2. The benchmark closed below the 200 dma for the first time since the initial shock in the aftermath of the Brexit vote, in June of 2016 and
3. SPX provided a downside breakout of a bearish pennant, with a 2-percent penetration.

Yesterday’s closing price for the S&P 500 tested, but ultimately closed slightly above, the February 8 close. On an intraday basis, the February 9 trough maintained support. A lower trough would establish a downtrend. The bearish pennant downside breakout suggests the price will penetrate this last line of defense.

If the outlook was so glum, however, why are Asian stocks displaying resilience, trimming much deeper, earlier losses? We figure it's dip buyers, bullish on the hardcore fundamentals of the first synchronized global economic growth since the Great Recession. These buyers are disregarding what they consider “noise,” short-term movement caused by speculation and a herd mentality.

The tech selloff in the US was triggered by a trifecta of circumstances, perhaps more relevant to US investors:

1. Amazon

US President Donald Trump’ continued his attacks on Amazon (NASDAQ:AMZN), for, he says, exploiting US Postal Service delivery fees. This is an escalation on his previous charges that the mega retailer pays fewer taxes than they should. The barrage of presidential rage against the company is taking its toll.

2. Facebook

Facebook's (NASDAQ:FB) data breach is increasingly seen as a cynical use of users personal information for greed and political manipulation. Given the company's lagging efforts to protect users' privacy, it may necessitate government regulation, which could fan out to other big tech platforms and cause deeper scrutiny regarding whether tech sector outsized earnings were garnered at the expense of user privacy rights.

3. Intel

Shares of mega chipmaker Intel (NASDAQ:INTC) tumbled on a Bloomberg report that Apple (NASDAQ:AAPL) plans to replace Intel's processors in Mac computers with chips it will manufacture on its own.

Each of these individual reasons hit the full sector, which was already primed for profit-taking by investors who’d watched technology shares lead US stocks to a spirited rally last year, helping the Dow post 70 records during 2017, its highest for one year, ever, topping the previous “record of records” in 1995.

At the end of the day though, most dip-buyers will argue that company growth, not geopolitics nor scandal nor presidential rage, will determine the value of shares. This technical-versus-fundamental debate will probably be settled during the upcoming earnings season. It will provide investors both a chance to see the numbers as well as give them the opportunity to find out whether even strong earnings and revenues will be enough to help counter what is increasingly seen as an outright market correction.

This morning in Australia, at its monthly meeting, the Reserve Bank of Australia left interest rates unchanged.

The Australian and New Zealand dollars had the biggest gains among G10 currencies versus the greenback. This is noteworthy considering how sensitive both currencies are to China’s economy, suggesting faith that a trade war may yet be averted.

Crude oil steadied after its biggest loss in almost two months.

Bitcoin surged for a second day, to $7,400, despite a Death Cross, when the 50 dma (green) crossed below the 200 (dma). Several factors may have caused this newfound optimism for the flagging asset.

Its earlier plunge provided a buying dip for bulls. In addition, the recent ban on cryptocurrency ads but Google (NASDAQ:GOOGL), Facebook and Twitter (NYSE:TWTR) may legitimize the space may, ironically, providing legitimacy for the asset class. As well, a report that banks will enter the crypto market, which could provide added liquidity to Bitcoin, thereby raising the price, sent the digital currency soaring.

Technically, BTC is still in a downtrend, making this morning's move higher nothing more than an upward correction.

Up Ahead

• The New York Fed debuts its Secured Overnight Financing Rate on Tuesday.
• Music streaming service Spotify (NYSE:SPOT) begins trading today, via an unusual direct IPO listing.
• The Reserve Bank of India decides on policy on Thursday.
• U.S. employment data for March is scheduled to be released Friday; unemployment probably fell after holding at 4.1 percent for five straight months.

Market Moves

Stocks

• The Stoxx Europe 600 Index slipped 0.5 percent with the first retreat in more than a week.
• Futures on the S&P 500 rose 0.5 percent.
• The MSCI All-Country World Equity Index dipped 0.1 percent to the lowest in 19 weeks.
• The U.K.’s FTSE 100 fell 0.6 percent, reaching the lowest in a week on the first retreat in more than a week.
• Germany’s DAX fell 0.7 percent, the largest fall in more than a week.
• The MSCI Emerging Markets Index gained 0.1 percent.
• The MSCI Asia Pacific Index climbed less than 0.05 percent.

Currencies

• The Dollar Index dipped 0.15 percent to the lowest in a week after paring a deeper, 0.25 percent loss.
• The euro gained 0.2 percent to $1.2328.
• The British pound gained 0.2 percent to $1.4072.
• The Japanese yen decreased 0.1 percent to 105.96 per dollar.

Bonds

• The yield on 10-year Treasuries gained one basis point to 2.74 percent, the biggest advance in more than a week.
• Germany’s 10-year yield climbed one basis point to 0.50 percent, the highest in a week on the largest surge in almost two weeks.
• Britain’s 10-year yield decreased one basis point to 1.35 percent, reaching the lowest in more than 10 weeks on its seventh straight decline.

Commodities

• West Texas Intermediate crude gained 0.3 percent to $63.22 a barrel.
• Copper increased 0.2 percent to $3.06 a pound, reaching the highest in almost two weeks on its fifth consecutive advance.
• Gold decreased 0.1 percent to $1,340.47 an ounce.