Trading Room – Thursday 25 Oct 2018
Stocks plummeted on Wednesday as a sharp drop in tech shares and worries about corporate earnings added fuel to the month’s steep pullback for US stocks.
The Dow Jones Industrial Average dropped 608.01 points at 24,583.42 and erased all of its gains for 2018. The S&P 500 dropped 3.1% to 2,656.10 and also turned negative for the year. The Nasdaq Composite fell 4.4% to 7,108.40— entering correction territory — as Facebook, Amazon, Netflix and Alphabet all traded lower.
An increasingly murky macro picture is clouding the 2019 earnings outlook leaving investors to largely shrug off a solid start to the third quarter earnings season according to one analyst quoted.
While valuations have certainly come down in recent weeks, at 16 times forward earnings for the Russell 1000 index, they aren’t in the bargain basement by any means, especially if earnings growth slows more than expected next year.
US stocks have taken a beating for the month with the Dow having dropped 7.1% in October, while the S&P 500 has pulled back 8.9%. The Nasdaq, meanwhile, has tumbled 11.7%.
Several factors have conspired to knock markets this month and the factors given include some earnings disappointment, a brewing conflict between Italy and the European Union over budget spending, criticism of oil power Saudi Arabia over the killing of a dissident journalist and finally, worries that world growth is losing steam.
The selldown in the US was expected and the knock-on effect on global stocks and Bursa Malaysia is likely to continue.
It’s also a kiss goodbye to the high-flying Technology sector, which was flagged by our Master Algorithm for some time and we have been out with hefty profits earlier.
For those still having Technology stocks, avoid or trim your exposure fast (if you still haven’t done so much earlier).
The key consideration for elite traders now is to know when and where the bloodbath will or may end.
You must have the information as an elite trader to act to capitalise on the opportunities that the markets selldown is bringing.
Follow the mPower Algorithm report to see the key levels and time to act.