Dow Jones Slumps 200 Points amid Risk Aversion

US indexes had performed badly yesterday, with the Dow being the one who was hurt the most. The price slumped more than 200 points, top tick to bottom tick, as the tensions between the US and North Korea continue to be at high points. Binary options activity had been extremely intense yesterday as the move progressed on the downside.

Latest comments from both US and North Korea officials had fueled the risk aversion as the situation seems that it will escalate further in the near future.

Technical pattern suggests further continuation might follow

Looking at our chart below, the downside move started on September 1st, after the release of the US NFP and Unemployment figure, which came below market expectations. The market then gapped lower since over the weekend news regarding a successful test of a hydrogen bomb by North Korea had been released. A consolidation structure followed after the gap, confirming that the buyers were not eager to fill it and regain terrain.

Dow Jones chart

Following the consolidation period, we see an impulsive bearish leg down, which took place yesterday, which account for more than 200 points. Interestingly though, after yesterday slump we see again a consolidation structure building up, so a usual impulsive vs. corrective move structure, which could signal additional selling might follow.
If the political tensions will escalate further we expect the price to resume the downside and break below the bottom of the current consolidation. Binary options could be placed in case a breakout occurs, so there is a lot of profit potential on the table.

The US equity market is in a very bad technical position and current downside risks might trigger a stronger wave of selling as the prices are still located around all-time highs.
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