US100 breaks out below key support zone

On the eve of Powell's speech, U.S. indices record a downward correction. The S&P 500 is down 0.6%, the Nasdaq 100 is losing more than 1%, and the Russell 2000 is down 0.7%. These declines are being paralleled by increases in U.S. bond yields and the broad-market strength of the dollar.

The market is evidently awaiting incoming information during speeches at the Jackson Hole symposium, an annual gathering of central bankers from around the world. At the moment, investor sentiment is primarily focused on the macro environment, which depends in particular on the situation in the US economy.

Much about monetary policy and the direction of the Fed's decision may be brought by Powell's speech, which investors are particularly looking forward to. If the fears of recession hanging over the market are confirmed, one can expect sharper movements on stock indexes. If, on the other hand, Powell reverts to hawkish rhetoric, the markets may also clearly feel it due to investors' strong pricing of the first reductions in September. In particular, the Russell 2000 index is exposed to stronger declines in such a scenario. Smaller companies are rebuilding their gains after the slump in early August precisely under the scenario of upcoming interest rate cuts on the assumption of a “soft landing” of the economy. 

At the moment, the US100 index is falling below an important support structure that previously defined the July downtrend (a zone near 19,740 points). This is happening after the negation of the attempt to break through it on August 1, when the dynamic downward directional movement resumed. 

Source: xStation