Geopolitical anxieties weigh on stock market, investors take note of euroskeptics in French elections

April 12, 2017
By Vlad Karpel

Stocks are trading slightly lower across a broad range of sectors today, as lingering tension on the geopolitical stage strains U.S relations with Russia and China. Currently, Russia is seeing diplomatic pressure from the U.S to abandon support for Syrian President Bashar al-Assad. While the U.S administration has coupled this pressure with an accusation of Russian complacency with the deadly Syrian chemical weapons attack, President Trump has said the U.S is not interested in a protracted ground war in Syria. It is also in Russia’s best interest to de-escalate tensions and avoid any trajectory toward conflict.  

At the same time, the Trump administration is calling on China to cooperate in disarming a nuclear-armed North Korea- a proposal met with positive affirmation from China. The public exchange was bookended by the rhetorical flair of President Trump, as he inferred on Twitter that the U.S would take unilateral action against North Korea if China does not cooperate. Chinese President Xi Jinping called for a peaceful resolution between the U.S and North Korea on Wednesday.

When geopolitical tension is high, investors will move to safety by investing in stable G-10 markets- in particular the U.S dollar. Gold serves as a perceived safe-haven as well, which has seen gains today. The CBOE Volatility Index (VIX), otherwise known as the ‘fear gauge’, is nearing a five-month high.  

The Dow is currently down 0.38%, or 79 points, at 20,572. The Nasdaq-100 is down 0.53% at 5,837 and the S&P 500 is currently trading at 2,344 which is down 0.44% from the open.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows overall positive movement. Today’s positive vector figure of +0.26% holds for another trading session and is followed by choppy movement. Today’s support and resistance is 2,342.94 (± 3.63) and 2,367.85 (± 3.66), respectively. The predicted close today is 2,360.29.   



Crude oil is facing another drawdown, despite news from OPEC and the U.S which would otherwise push prices higher. Major OPEC oil producers are widely expected to extend the production cut accord into the second half of this year, and reports for U.S crude supplies are showing a decrease. However, the fundamental data provided is having a hard time making an impact in the market, as prices are already pushing against technical resistance levels.  West Texas Intermediate for May delivery is currently priced at $53.14 per barrel, down 0.54% from the open.

Looking at USO, a crude oil tracker, our 10-day prediction model shows downward movement building incrementally. The fund is currently trading at $11.17, which is down 0.04% from the open. Today’s prediction sees support at $11.03 (± 0.06) and resistance at $11.17 (± 0.06). The predicted close for today is $11.16. Vector figures show -0.09% for today, then progress past -1.00% within three sessions. All vector figures are based on today’s market conditions.  



The price for June gold is up 0.09% at $1,277.40 a troy ounce. Current geopolitical risks and wariness around an increasingly euroskeptic French political election cycle is driving gains in the perceived safe-haven metal. The U.S dollar has also subdued its gains previously this week. The overall mood on Wall Street has become cautious and bullish market sentiments are temporarily dampened.  

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows consistent positive movement. The gold proxy is currently trading at $121.425, up 0.19% from the open. Today’s predicted low is $120.87 (± 0.31) and the predicted high is $123.46 (± 0.31). The predicted close today is $122.04. Relative to today’s conditions, vector figures ease from +0.90% but remain positive throughout the 10-day window.  



Geopolitical worries are still front and center for most investors, who have turned to bonds for safety, which continues to drive down yields. Bond prices and yields are inversely related to one another. Currently, markets are sending mixed signals amidst geopolitical posturing, growing questions around the future of the EU,  and a normalization of monetary policy from the Fed. The yield on the 10-year Treasury note is down 0.66%, currently trading at  2.29%.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see a negative correction in our 10-day prediction window. Relative to curent conditions, we see vector figures moving from -0.22% today to -0.78% in three trading sessions.  The ETF is currently priced at $122.53- up 0.09% from the open. The predicted close today is $121.48 with a low and high of $121.18 (± 0.27) and $122.42 (± 0.28), respectively.  



The CBOE Volatility Index (VIX) is currently up 5.44% from the open at 15.89. Relative to today’s conditions, the 10-day prediction window shows consistent negative signals. The predicted close today is 14.02 with a negative vector of -0.83%. Today’s predicted lows and highs are 14.02 (± 0.22) and 15.84 (± 0.24), respectively.


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