Wed 5 Dec 2018
The US markets plunged sharply overnight with its main index Dow down 800 points on rising fears of an economic slowdown.
The Dow Jones Industrial Average fell 799.36 points, or 3.1 percent, to close at 25,027.07 while the S&P 500 declined 3.2 percent to close at 2,700.06. The benchmark fell below its 200-day moving average, which triggered more selling from algorithmic funds.
The Nasdaq Composite meanwhile dropped 3.8 percent to close back in correction territory at 7,158.43. The Russell 2000, which tracks small-cap stocks, dropped 4.4 percent to 1,480.75, marking its worst day since 2011.
It was reported that the selldown started when the yield on the US three-year Treasury note surpassed its five-year counterpart on Monday. When a so-called yield curve inversion happens — short-term yields trading above longer-term rates — a recession could follow, though it is often years away after the signal triggers.
Still, many traders in the US believe that the inversion won’t be official until the 2-year yield rises above the 10-year yield, which has not happened yet.
The flattening yield curve caused investors in the US to bail on bank stocks on concern the phenomenon may hurt their lending margins while industrial stocks suffered from lack of concrete news on the US-China truce and impending negotiations.
According to news websites, US President Trump said in a series of tweets Tuesday that a deal between the two countries would get done if possible. “But if [it’s] not possible remember … I am a Tariff Man.“
According to an analysis report, the inverted curve trend in the US bond market has a long history of foreboding accuracy and has kindled talk of a recession there.
There is the ever-growing possibility that the 2-year Treasury note yield could now be higher than its 10-year counterpart for some time, a condition known as an inverted yield curve, which has accurately predicted each of the last seven recessions, including the devastating one that began in US in 2007.
Typically, an inverted yield curve leads a recession by about a year. According to the pessimists, assuming the inversion happens over the next several months, its impact at the least is likely to be delayed to 2020.
However, others economists are not convinced. Goldman Sachs analysis models for example was reported to put the risk of recession at 10 percent over the next year and 20 percent in the next two years, which actually is below the historical average.
The optimists say that current conditions in the US suggest little danger of a significant economic downturn. Consumers and business owners are confident, corporate profits are soaring and the unemployment rate is headed toward the lowest level since the mid-20th century.
But what we have is the US market is plunging. Has irrationality taken hold on sentiment over facts? Should you follow the selling or take advantage by buying at low prices?
There is always conflicting analysis at key market turning points and elite traders need to see the market for what it is and how it behaves.
Without understanding the concept of supply and demand of market participants manifested in key technical and quantitative indicators, traders would be trading blindsided by conflicting news and analysis.
Assigning probabilities are the key parts of any analysis as nothing is ever guaranteed in the markets. That is why elite traders need to know when the market is going to break or not and in what time frame is that likely to happen.
Most of the time, without having an understanding of the above analysis, common traders simply lack not only the information to make their crucial decisions but the courage and faith in their trading plans.
Worst, by following others blindly, they get thrown to the pit by entering at the wrong time and exiting at the wrong time every time.
We say get the right information from the facts. With millions of data calculated and assigned probabilities, and there are no grey areas in mathematics, big data analytics and algorithms are the future of the trading world.
So, what is happening in the US market both on its macro indices and as we drill down to some of its key crucial stocks like Apple, Microsoft, Boeing, Caterpillar, Amazon, Goldman, JP Morgan, etc?
How will the US market move in the next few months and where will the local market move? When should you stay out and when should you start accumulating and buying stocks at the bottom for the local market?
At all times, elite traders should be busy taking action on their portfolios as there are always opportunities in all market conditions.
Whether you are holding a Model Portfolio of stocks, looking to trade or just want to buy and accumulate at key levels, you must know exactly what you are doing to outwit the market and extract absolute returns (if not relative).
On the balance of probabilities, as we look at the millions of data from global and the local stock market trades and their key technical and quantitative data, we are very clear where and what elite traders should do right now.
Join and network with us at our mPower Algorithm and mPower Trading programs and see how your outlook on the market and stock portfolio could be helped and shaped by big data analytics and trading algorithms.