Chart of the Day USTEC (Nasdaq 100)
Potential Correction Coming USTEC
On the COVID-19 outbreak, China reported 2,048 new cases yesterday, slightly higher than the 2,009 the previous day. The broader trend appears to be a gradual decline in the number of new cases although the WHO director general cautioned overnight that “it’s too early to tell if this reported decline will continue.” Meanwhile, some foreign manufacturers are restarting production in China, after an extended Lunar New Year break, with Toyota reopening two of its four Chinese auto factories yesterday and Samsung saying it would resume operations at a TV plant in Tianjin.
Market sentiment had been supported by policy easing by the Chinese authorities, to support the economy in the face of the virus. Yesterday, the PBOC cut its medium term loan (MLF) rate by 10bps, to 3.15%, and it is expected to follow this up with a 10bp cut to the 1-year loan prime rate on Thursday. The PBOC’s easing follows Finance Minister Liu Kun’s comments over the weekend that China would implement “targeted and phased” cuts to taxes and expenses for businesses. China’s CSI300 index rose 2.3% yesterday and it has now more-than-fully recovered from its 8% plunge after the market reopened after an extended Lunar New Year break.
As a proxy for the wider macroeconomic impact, markets focused on an Apple statement which said that the company will miss its previous revenue guidance for Q1 as a result of the coronavirus outbreak. It said the resumption of production in China has been slower than anticipated, while demand has also been hit. Demand outside of China was said to be in line with expectations. Risk sentiment fell during the Asian trading session.
From a technical and trading perspective, the USTEC has potentially completed a cycle on the test of the yearly first resistance pivot point and the projected ascending trendline resistance, a close today through the near term volume weighted average price will add conviction to the near term bearish perspective and set up a test of 9280/60 as this area supports bulls will look to step back in to develop a potential platform to set a base to target a run at the magnetic 10K figure.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!