The Coming Financial Storm
Stock-Markets / Financial Markets 2018 Dec 18, 2018 - 02:13 PM GMTBy: FXCOT
The Dow Jones Industrial Average slumped more than 500 points Monday as investors looked ahead to this week’s Federal Reserve meeting amid mounting signs of slowing economic growth around the world. Major indexes opened modestly lower and began a steady descent around midday. All 30 stocks in the Dow industrials and all 11 sectors in the S&P 500 ended lower. The declines pulled the technology-heavy Nasdaq Composite into the red for the year, while the Russell 2000 index of small-capitalization stocks slumped into a bear market--a decline of more than 20% from its Aug. 31 high. And U.S. crude settled below $50 a barrel for the first time in 14 months.
PutCall ratio
The put call ratio has dipped below 1.05 from 1.1. This can suggest some weak bullish signals to a mild rally into year end. However this signal has been weak over the years so we look for some signs.
Advance -Decline ratio breaks trend
The trend in the NYSE Advance-decline cumulative has been broken to the downside. The momentum is now starting to accelerate on the downside. The VIX is at 24 which is suggestive of dislocation and fear in the market. We made this point before that VIX has not been this high for a long time. Generally when VIX remains above 20, it comes down after 3 weeks. It is now above 20 for over 8 weeks. Things could get ugly now as the Buy the dip crowd has evaporated and tired. There is a glimmer of hope though. The last panel shows the SPX AD line which is still relatively stable to long term uptrend. However our suggestion is now to sell the rallies.
USDJPY Triangle break
USDJPY has been in tight consolidation between 114 and 113. That range is now almost broken give or take a fe pips. We could have sever downward momentum into the new year.
EURUSD: In mud
EURUSD up and down between 1.14 and 1.1230 continues. The pair is heavily oversold therefore to short it is difficult. To go long is going against the established trend. There are reasons for both sides here. It is best to watch the action. Prices could move to 1.1 and then back to 1.15. We see a lot of buying as EURUSD dips into 1.12 zone.
GOLD: ominous break ahead
GOLD will need two closes above 1250 to suggest a breakout but the continuous build up looks promising.
Fundamentals: Slow Economy everywhere
Chinese cars volume sales fell 16% in November. Things are looking even more sever in other part of Asia. In India too, Auto numbers are looking dreadful for November. Car manufacturers across the board have cut production sharply due to a tepid festive season demand. As per the Society of Indian Automobile Manufacturers (SIAM) data, car makers cut output by 20 percent in November. Maruti Suzuki has cut production by almost 12 percent. Mahindra & Mahindra has cut production by almost 26 percent and Tata Motors reduced production by 22 percent
Car sales levelling out
In the US, the total vehicle sales have levelled out. Growth has petered out. Car sales is one of the most reliable indicators of a economy's strength. Higher mortgage rates and lower consumer sentiment is starting to take it toll.
Consumer Sentiment
The sentiment is still in the high numbers. But things will get nervy once the consumer start to digest the falling stock prices. This together with high rates and stagnating wage growth will have an effect on future sentument reading. That will further kick the spending habits and trigger the vicious spiralling of lower spending and lower stock prices.
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Last Few Trades
The history of trades can be seen. High quality trades which combine both scalping and volatility trades. December has see a pickup in volatlity so its very good news for trading.
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