US Bull Market at Risk - Pivotal Week
Updated
US equities have had a largely aggressive bull run to date. However, current economic conditions and future expectations are seriously rattling investor confidence. As the Fed Chair stated last week, it is very rare for markets to decrease in strong economic growth conditions. However, we have had three major corrections this year alone and the bulls are starting to question the strength of the current trend.
Although investor sentiment is not exactly confident which way the market will go (look at the dramatic rise in the save-haven asset, gold, over last two weeks), it does not mean that we are definitely heading for a reversal. It is still a possibility and it should be considered into long term strategies.
The chart above indicates that we are in the last stage of the cup and handle bullish continuation pattern. While it does show signs of bullish continuation on a technical analysis front, it is in no comparison to the underlying fundamental analysis of the market, which has the greater pull on the market for medium to long term.
As such, this coming week 22-26/10/18 will be pivotal in determining where the market is leaning. Worst case scenario, earnings from Caterpillar (CAT), 3M (MMM), McDonalds (MCD), Verizon (VZ), AT&T (T) Boeing (BA) Lockheed Martin (LMT) will be OK but falls short of earnings expectation. This will most likely plunge the market further down as the market starts to realise the larger implications of the global economy. Gold and US T-Bonds yields will rise aggressively, fund managers will come out and say they are changing the weight of their portfolios to larger fixed income and cash securities. The list goes on, but you get the point, global sentiment will change and warnings will pursue.
Best case scenario, earnings of the above-mentioned companies are strong, some positive news about China decentralisation, de-escalation in the trade war etc, market rebounds and closes above 26000 for the week. Following that, cup and handle bullish analysis can be sought and new long positions can be opened.
Another flat week is not good and sees an equal chance in going either direction.
2018 has been a tumultuous year for equities and the market is not responding well to technical analysis. The market is largely determined by fundamental analysis such as Trump Administration International Relations, global economy health, trade wars et cetera. So try to understand the economic conditions before applying technical analysis as it will provide much needed context and ground your analysis with global risk sentiment.
21.10.18
Although investor sentiment is not exactly confident which way the market will go (look at the dramatic rise in the save-haven asset, gold, over last two weeks), it does not mean that we are definitely heading for a reversal. It is still a possibility and it should be considered into long term strategies.
The chart above indicates that we are in the last stage of the cup and handle bullish continuation pattern. While it does show signs of bullish continuation on a technical analysis front, it is in no comparison to the underlying fundamental analysis of the market, which has the greater pull on the market for medium to long term.
As such, this coming week 22-26/10/18 will be pivotal in determining where the market is leaning. Worst case scenario, earnings from Caterpillar (CAT), 3M (MMM), McDonalds (MCD), Verizon (VZ), AT&T (T) Boeing (BA) Lockheed Martin (LMT) will be OK but falls short of earnings expectation. This will most likely plunge the market further down as the market starts to realise the larger implications of the global economy. Gold and US T-Bonds yields will rise aggressively, fund managers will come out and say they are changing the weight of their portfolios to larger fixed income and cash securities. The list goes on, but you get the point, global sentiment will change and warnings will pursue.
Best case scenario, earnings of the above-mentioned companies are strong, some positive news about China decentralisation, de-escalation in the trade war etc, market rebounds and closes above 26000 for the week. Following that, cup and handle bullish analysis can be sought and new long positions can be opened.
Another flat week is not good and sees an equal chance in going either direction.
2018 has been a tumultuous year for equities and the market is not responding well to technical analysis. The market is largely determined by fundamental analysis such as Trump Administration International Relations, global economy health, trade wars et cetera. So try to understand the economic conditions before applying technical analysis as it will provide much needed context and ground your analysis with global risk sentiment.
21.10.18
Note
Not looking good so far. Wednesday is very important as Amazon, Google earnings will be released. Watch the earnings to get a gauge about the momentum of the market.
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