Australia: S&P/ASX 200 (.AXJO) set to tumble as Wall Street enters correction
The Australian sharemarket is staring at another day of heavy falls as rising coronavirus fears sent Wall Street into a technical corrction overnight.
1. Volatility increases further: Panic in global markets only escalated overnight, still on fears that the coronavirus is rapidly evolving into a global pandemic. Market volatility is particularly high, with the VIX hitting as high as 33.
That’s sent stocks plunging even further, with many of the world’s major benchmark indices entering what’s considered in technical analysis a “market correction”. Naturally, the demolition of risk-appetite has seen traders flee to safe-havens, many of which have traded at historically significant levels.
2. A spike in possible US coronavirus cases: The catalyst for the latest deterioration in market sentiment has been the burgeoning belief that the coronavirus has arrived on US shores. Several reports broke in the last 24 hours suggesting that the possible cases of the disease has spiked, and has become spread wide across the country.
A press conference held by US President Trump failed to quell concerns. Instead, traders have latched onto this morning reports that the state of California is monitoring 8,400 for the virus.
3. Signs of lockdown in Asia: That information compounded several stories reported in Asian trade regarding the coronavirus. The number of cases in South Korea has spiked again yesterday, to climb above 500, with the country slowly becoming the new epicentre for the disease.
The cases in several other countries is also still increasing. The profound social economic impacts of the virus was hammered home last night, too, on reports that Japanese Prime Minister Shinzo Abe has ordered the closure of Japan’s schools from next week.
4. European and US stocks plunge: The stark realization of how quickly the coronavirus is spreading, and out of the control of officials, saw traders dump risk en masse. European stocks sustained the heaviest losses, with major European equity gauges registering losses of over 3 per cent last night.
In US trade, the losses were relatively less pronounced, by the S&P500 has fallen approximately 3 per cent. And in broader markers, oil prices have proven the heaviest hit from global growth concerns, dropping by over another 4 per cent overnight.
5. Safe havens register records: This risk-off move has naturally seen safe havens rise. Investors have flocked to the safety of government bonds. The US 10 Year Treasury yield hit new record lows, as died Australia’s 10 Year Government bond yield yesterday. Gold has also risen.
While in FX the Japanese Yen has been the outperformer. The US Dollar has pulled-back, even leading to a lift in the Australian Dollar overnight, as traders assume a hit to the US economy from the apparent spread of the disease within the US.
6. Doubts over central bank support: Volatility is being fuelled by fears that central bankers won’t respond quick enough to the crisis. Markets are still betting another period of global rate cuts will begin with s US Fed cut in April. However, the conviction behind this views was undermined in the last 24 hours.
The Bank of Korea surprised the markets yesterday, by keeping its rate settings on hold. And the markets reacted unfavourably to comments by ECB President Christine Lagarde overnight that coronavirus does not yet require a policy response.
7. ASX set for steeper falls: Overnight volatility is setting up the ASX200 for another heavy day of losses. SPI Futures are implying 123 point spill for the index this morning, which will take it close to the realms of a 10 per cent fall from last week’s high, and qualify as going into technical market correction, too.
It will also come on the heels of a fourth success daily decline for the ASX200 yesterday. It dropped 0.75 per cent, with the tumble paced again by energy stocks, and the IT sector.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
The projected upper bound is: 6,825.81.
The projected lower bound is: 6,486.71.
The projected closing price is: 6,656.26.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.
Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 7.7973. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 5 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 26.65. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 24 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -209.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 4 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 3 period(s) ago.
Rex Takasugi – TD Profile
S&P/ASX 200 closed down -50.200 at 6,657.900. Volume was 70% above average (neutral) and Bollinger Bands were 91% wider than normal.
Open High Low Close Volume___
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 7,002.60 6,947.50 6,714.60
Volatility: 19 16 15
Volume: 847,333,632 607,267,776 630,757,696
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
S&P/ASX 200 is currently 0.8% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of .AXJO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .AXJO and have had this outlook for the last 1 periods. Our momentum oscillator is currently indicating that .AXJO is currently in an oversold condition.
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