Monday, January 15, 2018

Behind Equity Indices Mix Market Reactions Contrary to Record Highs

What really drives these mix market movements that we are seeing?

Especially in today’s exceptionally high equity prices in the stock market , often times there are relatively mix price directions that occur making most investors and some market participants to wonder … what gives? 

RECALL: As for the most recent declines with the Futures stock indexes on the DOW with a triple digit drop, both the SP500 and the NASDAQ following suit with an average of a double figure have been the relative market behavior before the next rally takes place,. And we have witnessed these occurrences in just the first two weeks of the new month of January 2018 from the 2nd week of November, 1st and last week of December thereafter before closing at a higher price recovery. Although, to date the major equity  indices have made their new record highs even to this writing. It's really a reflection of a 'Market misdirection'.

It’s as natural as it can actually get. For those who closely monitor such mix market behavior, it is the responsibility of each investor in every level of sophistication to know what really lies behind these down on one side and up on the other side. And obviously there could be a number of valid reasons why these things happen.

Although, market reports after the fact is not as valuable when a tactical investor or professional trader's need to know in real time. As prices do move and could easily spill over to the next trading session which often does. This not only applies with the US markets but with the European and Asian markets as well since they are all correlated and globally connected.

Citing a few instances such as the China’s unverified reports that came through the wires stating that it would stop purchasing US treasury bonds and turned out to be challenged by the Chinese regulator saying it was ‘fake news’. Thus it was just one of several reasons that prompted the US Dollar Index to decline below 90.90  basis point which sent European majors, oil /energy and gold prices higher. Equivalently has more room for further gains at this time.

Over and above such other reports, Tech, Financials and Consumer stocks have been quite dominant beneficiaries of the newly passed tax reform. Even Jamie Dimon CEO of JP Morgan Chase have stated that it’s a positive move for banking and the economy. Then again, there are a lot more fundamentals influencing current stock prices as it continues to be a reinforced trend from secular forces until such time it does otherwise.

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3 comments:

  1. Identifying the real market drivers of price action between Asia, Europe and the US provides a better understanding of how today's prices move contrary to the record levels where they are now.

    Leaving behind other Asian markets to mend themselves with what is left and available to trade with from lagging conditions as major corporates are running to the bank. Earning season will surely dictate the next level of market direction..

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  2. Keeping up with the pace with the DOW Futures now at 26045 at the start after a MLK trading holiday is +244 above equivalent to a +0.95% gain. Naturally when markets open on the main index prices are expected to correct before but a triple digit change would follow suit.

    Smart funds are taking advantage of being ahead of the main market's levels and have used the futures to dominate market sentiments on stocks ahead of the opening. Which in turn main street would have to keep up with futures traders & investors way ahead of the game.

    Asia markets in general have been strong with the exception of the PH market where over protectionism on stock prices turns relative mix leaving retail investors to really mend for themselves without access to global trading. While market participants with prop trading accounts have taken advantage of this gap.

    There is enough room for Financial literacy to improve.

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  3. After a mild double digit decline YS Equities are at it again. This is where the real action is and would still continue to do so. No HYPE needed as some analysts continues to watch with a bit of weary as prices move higher.

    As we have said before...The comeback is stronger that the setback!

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