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  • Turkish lira’s collapse weighs on market sentiment.
  • CBOE Volatility Index rises 12% on Monday.
  • Energy, financials, and energy all lose more than 1% on the day.

Major equity indexes started the day slightly higher but failed to gather traction as investors remained focused on the Turkish lira’s collapse and its ripple effects on major global stock markets. The CBOE Volatility Index, Wall Street’s fear gauge, rose 12% on the day to confirm the broad-based risk aversion.

Commenting on the market sentiment,  “people are starting to pay attention to the problems facing emerging markets. When you have so many countries around world with trade actions, it’s really easy to draw conclusions that this could be much bigger than just a Turkey-related story,” Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia, told Reuters.

The S&P 500 Financials Index, which is seen as the most vulnerable sector due to banks’ exposure to Turkish lira, closed the day 1.01% lower. On the other hand, risk-sensitive commodities recorded losses on Monday, and the S&P 500 Energy Index erased 1.22%. The only two sectors that were able to end the day in the green were the healthcare and the utilities, which added 0.01% and 0.09%, respectively.

The S&P 500 Information Technology Index looked like it would ignore the negative sentiment as Amazon and Apple hit record highs in the day while Twitter recorded robust gains, but failed to stay in the positive territory.

The Dow Jones Industrial Average lost 125.64 points, or 0.5%, to 25,187.50, the S&P 500 erased 11.40 points, or 0.4%, to 2,821.88 and the Nasdaq Composite dropped 19.01 points, or 0.24%, to 7,820.10.

DJIA Technical Outlook (via FXStreet Chief Analyst Valeria Bednarik)

“The Dow attempted to recover some ground early US session, but the advance was quickly reversed, and the daily chart shows that sellers surged on a test of the 20 DMA, now directionless at around 25,380 and a major dynamic resistance. Technical indicators in the mentioned chart entered the negative territory, with the Momentum lacking directional strength and the RSI maintaining its downward slope, currently at 47, in line with additional declines ahead.”

“In the shorter term, and according to the 4 hours chart, the risk remains skewed to the downside, as the 20 SMA accelerated its decline, now aiming to cross below the 100 SMA, both also in the 25,380 region, reinforcing the area as dynamic resistance. Indicators in this last time frame posted a short-lived intraday recovery within the negative territory, but turned back south at the end of the day, also keeping the risk leaned to the downside.”

Support levels: 25,152 25,109 25,062
Resistance levels: 25,279 25,331 25,377