A tremendously precipitous situation awakes US stock traders on Tuesday morning. World markets deeply fear a potential US Recession and what it may mean for them.

Traders who spent the day away from the market, and who do not check in to see overnight markets, will be in for an absolute shock when they open their trading platforms Tuesday morning – a shock many will absolutely not expect.

World markets plummeted precipitously on January 21, with some foreign markets plunging more than 7%. Let’s look quickly at what happened and what it may mean for the US stock markets:

Let’s look at a table of what happened to the overseas broad stock exchanges (stock index used is similar to the US Dow Jones or S&P 500 average):

Let’s take a look at France’s CAC 400 Index to see a visual of how much damage these markets took:

Weekly damage:

Remember how I said that the next test of a breached 20 and 50 moving average is often the rising 200 period? That happened exactly to the French index, and could very well (in fact, may very well) happen for the US Stock Market.

The German DAX index shows how a prolonged momentum divergence can resolve very badly to the downside:

To add to the bad news, Dow Jones futures contracts were down 4.5% today, forecasting a potentially devastating open for the broader US Stock Market.

Here is the most recent price (weekly chart) for the S&P e-mini futures contract as of 8:00pm Eastern:

Be aware of this major overseas development, and try to adjust accordingly. Markets fall so much faster than they rise, and the risk remains to the downside for the time being.

Please be careful. Tomorrow may make the (recent) record books and it probably won’t be pleasant.