Today’s Key Market Drivers: 25th October 2018

“We are now likely going a lot lower on global stock indexes.”

It’s finally happened. The Dow Jones has closed down 600 points on Wednesday and closed a very bearish daily bar below the 200 EMA for the first time in over 2 ½ years erasing all of the market’s gains in 2018. The S&P 500 closed down over 3% substantially under the key 200 EMA daily barometer. Investors are worried that higher interest rates in the US will impact company earnings in future quarters and may bite the general economy also. Donald Trump on Tuesday flat out criticised US Federal Reserve Chairman Jerome Powell saying the Fed had taken rates too high, too quickly. Absolute rubbish! The US Fed has done exactly what it should do and the current pullback on US stock indexes is well overdue and welcomed by the market.

The biggest winner on Wednesday was the Yen as traders bought back into the safe haven and dumped all of its major cross currencies. The Pound was once again lower on the back of continued political instability surrounding Brexit and the Euro also continued to weaken under a backdrop of weaker than expected economic data numbers. German Manufacturing numbers and Euro-Zone Consumer Confidence data all missed estimates adding more selling pressure to the Euro. The European Central Bank releases its October policy statement today at 10.45pm AEDT so expect to see increased volatility on the Euro just prior and after the statement release. The Bank of Canada lifted its official cash rate as expected from 1.5% to 1.75% and said more rate hikes will be needed to keep inflation in check. The Canadian Dollar initially rallied on the news but has since erased most of the gains as the focus turns back on the correlations between falling stocks and currencies. Once stock markets finish the current correction the Canadian Dollar will present some great buying opportunities but patience is needed.

What was notable was the accelerated selling pressure on US stock indexes as they closed on Wednesday. Strong selling pressure into the closing bell is a sign of weakness and the buyers have given up trying to hold this market up and a sizeable correction has a distinct higher probability of happening now.

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About the Author: Andrew Barnett

Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).

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