Investors continue to run to the sell button locking in massive profits. This is being fueled by uncertainty on another wave of Coronavirus and the time frame of more fiscal stimulus. It is questionable that it may not come before the election as it continues to be used as leverage.
Everything sold off last night except the US dollar which was used as a safe haven. Gold, which was the save heaven until now also sold off, along with Silver. Tech, which showed some signs of strength this week was hit hard whilst Energy the hardest hit sector.
Whilst half the world is bracing for another wave and strict lockdowns, we are looking forward to coming out of them. Most of Australia is doing very well, and Vic is now back on track. As a result, we are starting to see borders reopen. NSW and SA are opening today, which is a big move forward and shows a willingness to get local tourism back on track. Furthermore, plans are being hashed to bring overseas students back. This will include a 14 day quarantine that will be paid by the student coming in.
However, with the Federal budget around the corner and the volatility coming from US markets, many investors could remain on the sideline.
Our market is set to fall this morning, opening near the 5850 level after a big sell off in the U.S last night. U.S futures sit in the green this morning, and if they remain so during our session it should help stem the expected bearish day.
The XJO, along with the U.S, are now comfortably trading in a downtrend. This change in trend has only really become apparent over the past few days and is expected to continue until we see a catalyst to shift sentiment. This could come from stimulus spending brought about by U.S congress, though this is looking further away now than ever.
Yesterday’s strong rally was almost out of character for our market. We essentially reached the downtrend line, and today’s expected bearishness will show a rebound from it. The next target is the local support at 5750, but the nature of the downtrend would be to expect this to break at some point.
Regardless, we must assume bearish to sideward movement, and don’t trade a break until we see one.
US shares fell strongly again overnight, falling back towards the lows of Monday. It came as members of the US Federal Reserve warned that the world’s largest economy would need more fiscal stimulus and the market is starting to give up hope that this stimulus will come before the November elections.
The major S&P 500 index fell to an eight-week low overnight, and global shares are now on pace for their first monthly fall since March. Increased tensions between Democrats and Republicans appear to be reducing the chance that further fiscal stimulus will be passed, so there could be more volatility to come ahead of November. Technology and Oil & Gas stocks again led the selling overnight, but every other major sector also fell.