Daytrading August 24 pre-market

Morning traders. Big day ahead. Everyone ready to go over the top? Thanks Trees and after-market regulars.

Market wrap:

Shares are primed to open more than 2% lower after a global market correction accelerated on Friday.

The September SPI200 futures contract plunged 110 points or 2.1% to 5058 as evidence that the Chinese economy is slowing helped hand the US's benchmark equity indices their biggest weekly losses in four years. Friday's trading volumes were the heaviest of 2015 as panic gripped world financial markets.

The Dow and Nasdaq both fell more than 3% on Friday to extend their declines since their May peaks beyond 10% - the technical definition of a correction. The S&P 500 shed 65 points or 3.19% to end the session 7.6% off its all-time high. The Dow lost 531 points or 3.12% and the Nasdaq 171 points or 3.52%.

"Right now there is a feeling of fear in the marketplace and all news is interpreted negatively and it's interpreted indiscriminately," Tom Digenan, head of US equities as UBS Global Asset Management, told CNBC.

The fragile mood on world markets deteriorated further when Friday data showed Chinese factory activity this month declined to the weakest level in more than six and a half years. The Shanghai Composite closed 4.27% in the red after coming within one point of a new low for the year despite government efforts to support the market. Europe's benchmark index entered correction territory and losses on Asian markets including Hong Kong and Indonesia blew out to more than 20%, meeting the technical definition of a bear market.

“This week’s sell-off started from the yuan’s devaluation, which generated speculation about the true state of China’s economy,” Hertta Alava, head of emerging markets at FIM Asset Management in Finland, told Bloomberg. “China’s PMI was weak, so it is just adding fuel to this negativity.”

Almost three-quarters of the S&P 500 was in correction by Friday's close, according to CNBC, nearly a third in a bear market, including market darling Apple. Despite the declines, the overall market valuation of 17.5 times earnings was still higher than the five-year average of 16.1, suggesting the market is still not cheap by historic standards.

Volatility surged, with the VIX soaring 46% on Friday to extend its gain for the week to 96%, the biggest weekly increase on record. The Russell 2000 dodged the worst of the collapse with a fall of 1.34%, but the small-cap index also entered a technical correction, down 10.7% from its high.

Europe's benchmark index saw its worst week in four years after Greece's government called a snap election. The Stoxx Europe 600 declined 3.26% to push its fall from its April peak to 12.7%. Germany's DAX lost 2.95%, France's CAC 3.19% and Britain's FTSE 2.83%.

The US energy ETF tanked 3.5% after crude oil dropped below US$41 a barrel for the first time since the GFC. West Texas Intermediate crude oil for October delivery settled 87 cents or 2.1% lower at US$40.45.

Australian iron ore giants recorded fresh multi-year lows in US trade. BHP lost 3.32% and Rio Tinto 2.04%. Spot iron ore for import to China held steady at US$55.60 a dry ton.

Gold stocks were not spared by a six-week high in the precious metal at the end of gold's best week since January. The NYSE Arca Gold Bugs index gave up 2.72%. Gold for December delivery settled $6.40 or 0.6% ahead at US$1,159.60 an ounce for a weekly rise of 4.2%.

Copper declined for a seventh straight week as dire Chinese factory data sharpened demand fears. London copper dropped 1.3%, aluminium 1.7%, lead 0.8%, nickel 2%, tin 2% and zinc 2.7%. US copper for September delivery dropped 1% t0 US$2.30 a pound.

The dollar was this morning buying 73.11 US cents.

TRADING THEMES TODAY

TIN HATS, STOUT HEARTS: We're now deep into one of those periodic market corrections where trading careers are made and lost. Your first priority is survival. You can't play this game without trading funds, so put your emotions to one side and make an honest inventory of your positions. Unless you have very deep pockets or are very confident of your corporate fundamentals you do not want too much market exposure right now. This downturn may be no more than another minor tantrum or it could be the start of a prolonged bear market. We won't know until much later. The speculative end of the market has held up pretty well during this retrace, but tends to play catch-up once the stench from the big end becomes impossible to ignore. A fish rots from the head. Beware of heavy falls and diminishing volumes - these are signs that brokers with positions in specs are withdrawing funds and will no longer prop their buy/sell queues. Lack of volume is deadly to trading. That said, intraday volatility is going to be very good for those who can adapt to the changing market. Shorting and swing trading will likely offer better opportunities than upside momentum/breakout trading in the short term, at least until confidence returns or this storm blows over. I'll be looking to buy 'oversolds' in the first half hour this morning and close long before the bell.   

ECONOMIC NEWS: No significant news scheduled here today or tonight in the US.

Good luck to all.