US markets followed European markets lower, which were led by Coronavirus second wave fears. Many European market indices fell more than 3%. DAX closed 4.37% lower. The SP500 was 2.84% lower at worst and closed 1.16% down. The Nasdaq closed only 0.13% lower.
This is the first time in the past month we have seen the US markets fall and not be led by Tech. This could flag the end of the rotation out of Tech in the US. So let’s keep an eye on this space as opportunities could arise here. Keep an eye out for signals on APT, APX, CAR, WTC that have pulled back over the past month following US tech lower.
We also saw the sell-down in Iron Ore continue which seems to be more of a seasonal pull back than anything fundamental. There is no real oversupply and demand is expected to remain strong in the medium to long term. Chinese port inventories remain low compared to the past few years. This selling could continue in the short term.
• Vic COVID numbers falling quicker than expected
• Lockdowns in Melbourne could start to loosen early
• Many states in Australia either have no or very little cases
• Some State Borders are showing signs they will start to slowly reopen soon
• Vaccine hopes
• China relations
• US elections
• Overseas spikes in COVID numbers
• Another round of strict lockdowns through Europe and the UK likely
• Leaked suspicious activity reports implicating many banks around the world
• A vaccine could take longer than many are indicating
With a fall in the U.S last night our market is set to follow suit this morning. U.S futures sit in the green which may help stem the bleeding during our session today if they remain so. The turn around in the U.S makes things cloudy. On one hand, it was a clear break of support, which will likely be reflected in our market today. On the other hand, they completely reversed from their lows showing buying power near the 3200 level.
With the expected falls this morning, our market should find support near 5750/5700. With the expected break of support this morning (and the broader descending triangle and channel), our market will be essentially trading in a downtrend as we now see consecutive lower peaks and troughs. How long this will last will once again come down to how the U.S performs.
Markets seem to be worried about several factors around the U.S election and the division between the two parties, and the virus having a second wave in some major countries in Europe. Without further stimulus to get markets out of the rut, and with confirmed technical movements, it seems the bearish sentiment is likely to continue in the short to medium term.
US shares suffered a fourth consecutive session of selling overnight, although prices did reverse strongly off their lows. Part of the recent selling appears to be politically driven, with investors worried that Republicans and Democrats won’t be able to come to a compromise on the next round of fiscal stimulus before the presidential election in November. The death of Supreme Court Justice Ginsburg and Republican attempts to rush through a replacement pick is causing investors to fret even further about the political situation.
It is worth noting that the tech heavy NASDAQ index had a fairly strong night overnight, finishing relatively flat in the face of selling elsewhere. Tech stocks were the best performers, while Basic Materials, Oil & Gas, and Financials stocks all fell extremely strongly.