After big overnight falls, the US dollar managed to bounce back a little shortly after the New York open, the Dow was well over 100 points off its earlier lows and the VIX had declined more than 10% from its earlier highs. It wasn’t exactly risk-on, but the situation certainly looked a lot calmer than at the European open. The S&P 500 had completely eradicated the gap it had left behind after the closing bell on Friday at 2344. Thus, with the gap closed, the sellers may step back in after this bounce.
With the dollar also testing significant long-term support levels, it was unclear whether the next move would be a much-needed bounce for the buck and stocks or if they would come under pressure again. Given that nothing has fundamentally changed since last week, I wouldn’t rule out the possibility of further losses for the stock markets. If the S&P does turn lower from here then 2300 could be the next stop, a level which was resistance in the past.
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