Today’s Key Market Drivers: 5th March 2019
Could this be the turning point for stocks after a two-month rally.
The US S&P 500 stock market turned red today closing down 10.88 points but it was the key pricing level of 2800 the market was focusing on which is the top of the pricing range when the S&P made a triple top in October, November, and December last year. After touching an intra-day high of 2818 the S&P 500 closed below 2800 at 2792 with many traders believing a successful China-US trade deal is already fully priced into the stock market. I can’t see both sides rolling over with zero tariffs and an “I love you”, “I love you too” final agreement. There will be some back and forth and it is certainly possible that Trump and Xi attempt to spin a positive trade deal but the market doesn’t like it. Stocks could be about to roll over to the downside with general profit taking being the initial trigger and then the US-China trade agreement to kick it in the backside.
China and the USA are said to be close to agreeing on a new deal and the press is expecting a signing ceremony before the end of March at Trump’s Mara Lago resort in Florida.
Whilst I did add more stock to the ShareSmart portfolio yesterday there is one stock the portfolio holds that has recently been trading directly in line with the S&P 500 index. Given the position is up around 10% since January 10th I may elect to sell the stock as I am mindful that the US stock market could pull back from these levels.
All eyes will be on the RBA today.
The Aussie Dollar will be volatile at 2.30pm AEDT today when the RBA delivers its March statement. There won’t be a change to the official cash rate, yet, but traders and economists are expecting Governor Lowe to acknowledge that a rate cut is as good a probability as a rate increase. The RBA Governor mentioned nothing about the potential for a rate cut in the February official statement but 24 hours later speaking at the National Press Club he said a rate cut or a rate increase were evenly poised. The market was expecting that the next move from the RBA would be up so a concession that there is a 50% chance the next move could be down, saw the Aussie Dollar sold off sharply.
The price of 0.7050 is a key level of support for the AUS v USD and if we see this level broken due to comments in the RBA statement today there would be a strong possibility the Aussie Dollar vs US Dollar would close back below 0.70c for only the third time in more than 3 years. From a mindset perspective, many buyers around the 0.7050 level would simply bail and give up. If the RBA acknowledges that interest rates could go lower then I would expect the ASX 200 to enjoy a positive afternoon of trading as lower interest rates are good news for blue-chip stock prices.
No data means no clear direction.
The US Dollar gapped down on Monday morning following comments from the US President over the weekend who said he was concerned a high US Dollar would hurt the US economy. The gap was closed through the Asian trading session and until we see some high impacting economic data currency markets will likely continue to support the US Dollar and safe havens as stocks will likely pull back a little through the Asian trading session today.
The high impacting data numbers will hit the market from Wednesday to Friday with the ECB’s monthly statement and official US jobs figures likely to have the biggest impact in the second half of the week.
Technical analysis is completely backward looking
The techo traders won’t like me saying this but I am going to say it anyway, because it’s true. Technical analysis should only be used to time the entry of your trade and you should never be using technical analysis or any indicator to tell you that the market is bullish or bearish. It is completely wrong and frankly insane to think a technical indicator is going to tell you that price is bullish or bearish or overbought or oversold because it is not technical indicators that drive the value of price. Investment Banks and Hedge Funds use fundamental facts, rumour and big money expectation to place bets that drive price in small, medium and large trends.
There is no question that technical analysis is very useful to time an entry for a trade but you must also accept and acknowledge the cold hard facts. 90% or more of retail traders only use technical analysis, they are lazy, they have no inclination to learn the fundamental facts and 90% or more of retail traders lose all their money in financial markets because they only use technical analysis.
The Fundamentals of the market will tell you if you should be bullish or bearish and you must have a fundamental view of the market if you are any hope of making handsome profits over the long haul.
What is weakness? Weakness is that little voice that says stop, this hurts, I don’t like this feeling, this is uncomfortable. Ignore it and push on. AB
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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