Buy The Rumour, Sell The Fact?
Global equities benchmarks are trading just off their recent highs this week with North American, Asian and European indices all in the red. The moves is likely down to a “buy the rumour, sell the fact dynamic which is playing out on the back of the US and China signing the phase one trade deal last week. The signing was well signalled and the market had been expecting confirmation of the deal since mid-December. With the deal now signed, the market is waiting on the scheduling for the first set of the next round of negotiations which will aim to deliver a phase two trade deal. However, the expectation is that these next talks will be far more laboured and, consequently, present much more risk of difficulty, which could hinder risk appetite.
Equities have also been lower this week in response to news that the International Monetary Fund has downgraded its global growth projections. The global lender of last resort cut its final 2019 estimate to 2.9%. This marks a reduction from the prior 3% reading, which already signalled the lowest global growth since the GFC. The IMF acknowledged that there had been a weakening of risks recently due to the US-Sino trade deal and Brexit deal, though was keen to highlight that the global economy is not yet at a turning point and downside risks remain.
Technical View
DAX (Bullish above 13186.22)
From a technical viewpoint. DAX is still stalled at the monthly R1 at 13500 following a fresh break above the monthly pivot at 13186.22. Momentum divergence poses downside risks though, for now, bias remains bullish with any pullback likely to find bids.
S&P500 (Bullish above 3190 )
From a technical viewpoint. Price continues to trade new highs and has now broken above the monthly R1. With price well above the monthly pivot at 3190 and with longer term VWAP still positive, continued upside likely.
FTSE (Bullish above 7455.4)
From a technical viewpoint. Price is still above the 7455.4 monthly pivot keeping the near term bias bullish, in line with bullish VWAP. However, If we move lower from here, the monthly pivot, in line with recent broken highs should offer first support ahead of the yearly pivot at 7295.3
Nikkei (Bullish above 23498.4)
From a technical viewpoint. Price is trading back above the monthly pivot at 23498.4 as the consolidation continues though upsides has so far been halted by the monthly R1 at 24102.6. With longer-term VWAP still positive, bias remains bullish. Any pullback should find support into the yearly pivot at 22261.2
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!