Markets selling off

Markets in Turmoil Again

Once again, the indices have sold off and reached their October lows. Once more, the US indices have turned negative for the year, which now becomes a huge worry for all. But this should not be a surprise, as investors have been dumping US stocks for weeks now, because concerns over the performance of the global economy are greater than the feeling that everything would sort itself out. A big factor in all this, of course, is the US-China trade war, which had its negative effect on companies from both sides. Even major US technology companies, which are considered to be more resilient to shakes in the economy, are also taking a hit. The so-called FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) were seen as the thing-to-have in your portfolio, but as always, these companies also perform well mainly during the bull market. Nevertheless, these tech giants are still trying to stay afloat, at least for this year. But from that top 5, only Facebook and Google have wiped out their yearly gains so far. Of course, the year is not finished yet, so they could try and push back up, but for Facebook that could be a mission impossible, as for now, the recovery is nowhere in sight.

Carney and May Were In The Spotlight Yesterday

The Bank of England Governor Mark Carney delivered his testimony on the November Inflation Report in front of the Parliament’s Treasury Committee. Carney said that there won’t be much stability in the British pound, at least in the near term, due to the Brexit uncertainty, as this could increase the currencies amplitude against its other major counterparts. The Governor also said that because of the messy Brexit, the Bank fears that there could be a supply shortage, which could drive prices higher. In this case, the BoE will have to adjust the interest rate accordingly, which means raising it.

In Other Today’s News

during the US session, we get durable goods orders for October. Expectations are for headline orders to have declined 2.5% mom after rising 0.7% in September, while core orders, which exclude to volatile items of transportation, are forecast to have accelerated to +0.4% mom from +0.1%. That said, such prints will drive both the headline and core yoy rates lower, something supported by the slide in the New Orders sub-index of the ISM manufacturing PMI for the month. Existing home sales for October, as well as the final UoM consumer sentiment index for November, are also due to be released.

AUD/JPY — Technical Outlook

As always, our favourite market sentiment pair that we like to monitor is AUD/JPY, which sold off yesterday, together with the equity markets. Looking at the 4-hour chart, the pair started forming lower lows and lower highs, which indicates that AUD/JPY could be set for a further decline. For now, even though we are seeing a small recovery, still, this might just be considered as a correction before another leg of selling. Hence why we will stay bearish, at least in the short run.

DAX — Technical Outlook

DAX, together with the other global indices, had sold off yesterday, reaching its October lows again. Looking at our daily chart, the German cash index manged to retrace back up slightly, but at the time of this analysis is getting held by the 11150 resistance area, which just yesterday was seen as a good potential area of support. We will remain somewhat bearish for the near term, especially if we see a violation of the psychological 11000 level.

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