Markets Sell Off Hard on Breakdown of S&P 500 Futures
The markets reacted harshly to yesterday's economic data, which came in as expected. Producer prices rose 0.4 percent on the month, matching the consensus, while initial jobless claims were 206,000 against a forecast of 205,000.
However, despite the lack of surprises in the data, the S&P 500 futures fell below their rising support line and declined below the June high, WTI crude traded above $100, silver plummeted from over $67 to below $65, copper lost nearly 5 percent, and gold declined by about $60 to trade near $4,400.
According to Golden Meadow, the author of the article, 'the data is not the reason' for the market's reaction. Instead, it was what the market was already leaning against: the stock market's breakdown and any remaining belief that oil prices were coming down.
The stock market has been in a precarious position since August, when it broke above its prior highs. Yesterday, Golden Meadow wrote that if stocks closed below both the rising support line and the June high, things would 'get volatile quickly.' Today, the S&P 500 futures broke below the latter, invalidating the breakout.
As a result of this breakdown, silver and copper have taken a significant hit, with silver falling through its 50-day and 200-day moving averages in a single session. Golden Meadow notes that 'silver leads on the way up, gold does not follow, silver leads on the way down,' which is a signature pattern for short-term tops.