Corona-Virus Sends Equities Sinking
Benchmark global equities have been heavily offered in recent trading as the impact of the Chinese corona-virus outbreak continues to dampen investor appetite. The virus, which broke out in China around two weeks ago, has now claimed the life of 80 people and spread across Asia, reaching the United States. There are fears too that the virus is already in other countries such as Australia and UK where tests are being carried out on possible cases.
The spread of the virus, which is eerily similar to the SARS outbreak in 2003 is causing a rise in uncertainty among investors. The world economy is already in a fragile state following the trade war between the US and China over the last two years and there are fears over how the global economy will cope with the situation. The IMF downgraded its global growth projections once again last week, citing the continued downside risks to the global economy. It's feasible to say these risks have now increased in the midst of this viral outbreak.
This week, investors will also have their eyes on the Fed and BOE which both meet for their January rates meeting. While the Fed is not expected to adjust rates at this point, the market is split over the likelihood of a BOE rate cut. Such a move could help buffer the downside in the FTSE.
Technical View
DAX (Bullish above 13186.22)
From a technical viewpoint. DAX continues to reverse from the monthly R1 at 13500 and is now challenging the monthly pivot at 13186.22. With longer-term VWAP still bullish, we could see a recovery here though a break below will open the way for a test of deeper support.
S&P500 (Bullish above 3190 )
From a technical viewpoint. Price is no challenging the rising channel low. With longer-term VWAP still positive here, a correction higher could still materialise, though, bulls will need to see strong reversal action quickly. A break lower here will target the monthly pivot at 3190 next.
FTSE (Bearish above 7455.4)
From a technical viewpoint. Price action has turned very bearish this week with price breaking below the 7455.4 monthly pivot. While the longer-term VWAP si still positive for now, bulls will need to see demand into the yearly pivot at 7295.3 to avoid a deeper move lower.
Nikkei (Bearish below 23498.4)
From a technical viewpoint. Price has now broken below the monthly pivot at 23498.4 as the reversal from the monthly R1 at 24102.6 continues. With longer-term VWAP still positive, we could see some support into the monthly S1 at 22860.8. Below here the next level to watch is the yearly pivot at 22261.2
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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!