The CBOE VIX Volatility Index (VIX) has experienced volatility over the past two days, but gave back the vast majority of the gains dictated by trade tariffs on Mexico and Canada, after Trump dropped them at the last minute and postponed the decision for another 30 days. However, 10% tariffs on China have already been imposed. Markets are trying to analyze what consequences such a decision might entail for the stock market and the economy; U.S. index futures are losing; the US500 is down nearly 0.7%, supporting a renewed unwinding of the VIX.
- As a major trading partner of the US, China has already announced retaliatory tariffs of 15%; this will include coal and LNG, and 10% on oil and US products in the form of farm machinery, trucks and infrastructure equipment for the mining sector. In addition, China has launched an investigation targeting Alphabet (GOOGL.US). It has also introduced export controls on a number of key minerals: tungsten, tellurium, ruthenium and molybdenum.
- Significantly, China's Ministry of Commerce said it had added two U.S. companies, PVH Group and Illumina Inc, to a list of so-called unreliable entities, exposing them to restrictions or penalties; shares of both companies lost 3.5 and 5%, respectively, in pre-market. At the same time, the ministry did not state exactly what the two companies are accused of; potentially sending a signal to Americans that more U.S.-based companies could face a similar fate if trade frictions take a turn for the worse and a settlement with Trump is not reached. PVH is a clothing company that owns such well-known brands as Tommy Hilfiger and Calvin Klein, and Illumina is a biotechnology company specializing in genome sequencing.
VIX index (M15 interval)
On the 15-minute interval, we see that the Volatility Index is trying to regain upward momentum and has broken out above the 50 and 200-session moving average, on the short interval, The area around the 61.8 Fibo retracement of the last upward wave served as support, but the price reacted to resistance from the 18.88 Fibonacci retracement. The level near 19 is also where the pressure to take profits would be probably high.
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Source: xStation5
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