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“Buckle up” … Wild Wednesday on Wall Street – ASX volatility is about to step-up

Wall Street suffered steep losses on Wednesday, leaving the Dow and S&P 500 index negative territory for 2021.

After briefly paring losses, declines accelerated in the wake of the policy statement from the Federal Reserve.

There were no surprises from the U.S. Fed on Wednesday, following the conclusion of its two-day meeting after opting to leave its benchmark interest rate anchored near zero and left unchanged its massive bond-buying program, following its first policy meeting of 2021.

In his post-meeting news conference, U.S. Fed Chairman Jerome Powell said: “The economy is a long way from our monetary policy and inflation goals, and it’s likely to take some time for substantial further progress to be achieved.”

At the finishing bell, on the New York Stock Exchange (NYSE), the Dow Jones Industrial Average lost -633.87 points, or -2.05%, to 30,303.17, posting its worst day since Oct. 28.

Boeing Co fell -3.97% and was among the top drags on the Dow after the planemaker took a hefty $6.5 billion charge on its all-new 777X jetliner due to the COVID-19 pandemic and the aftermath of a two-year safety crisis over its 737 MAX.

The broad-based Standard & Poor’s 500 Index closed -98.85 points lower, or -2.57%, at 3,750.77, slipping from a record high and suffering its biggest drop in three months.

The rich-tech Nasdaq Composite fell -355.47 points, or -2.61%, to close at 13,270.60.

Facebook shares fell -3.51%, with Tesla falling -2.14%, while Apple shares also dipped -0.77% after its results.

Microsoft gained +0.25% after reporting a stellar quarter. Sales grew by +17% on a year-over-year basis in its fiscal second quarter, while its cloud business accelerated.

The ASX futures fell -57 point, or -0.9%, to 6,648, while our local currency, the Australian dollar fell -1.40% and is currently buying US$0.7636 (as of writing).

In other news, investors were also transfixed by trading in videogame retailer GameStop and AMC stocks soar on another day of wild trading in heavily shorted companies, which has now surged more than +1,700% this month.

Shares of videogame retailer GameStop Corp and movie theatre operator AMC Entertainment Holdings Inc each more than doubled on Wednesday, continuing a torrid run higher over the past week, as amateur day traders in online chat rooms again piled into the stocks, forcing short-sellers such as Citron and Melvin to abandon their losing bets.

AMC soared more than +300% Wednesday.

More than one billion AMC shares traded in the name during the session.

“The Big Short” investor Michael Burry said in a now-deleted tweet Tuesday that trading in GameStop is “unnatural, insane, and dangerous” and there should be “legal and regulatory repercussions.”

The Cboe Volatility Index, known as the VIX or Wall Street’s fear gauge, jumped above 30 on Wednesday, hitting its highest level since November.

Viewing the technical standpoint for the S&P/ASX 200 (XJO), the Relative Strength Index (RSI) 3-day ‘lookback’ indicator has plummeted due to the overnight’s decline as it plunges through the 50-midway point.

Meanwhile, the Moving Average Convergence Divergence (MACD) hovers near the 0.00 axis, and presently, supports a bullish/mixed signal.

The Average Directional Movement Index (ADX) trend indicator is ranging.

Developed by J. Welles Wilder, the Relative Strength Index (RSI) is an extremely popular momentum indicator (oscillator) that measures price movements’ speed and change.

RSI oscillates between zero and 100.

According to Wilder, (depending on the period setting), the RSI is considered overbought when above 70 and oversold when below 30.

Signals can also be generated by looking for divergences, failure swings and centerline crossovers.

RSI can also be used to identify the general trend.

Gerald Appel developed the (MACD) technical indicator back in 1979, while in 1986, Thomas Aspray added the histogram.

The MACD is a tool used to identify moving averages that indicate a new trend, whether bullish or bearish.

(MACD) plots the distance between moving averages and helps traders identify trend direction and whether the bullish or bearish momentum in the price is strengthening or weakening.

Due to the (XJO) heavy fall, the support at 6,640 is now under pressure with the potential base, (broad support) is located at 6,580-90 is located beneath.

A bullish response is expected from here if challenged.

The resistance currently holds at 6,715-30. Reassess from there.