Afternoon trading Feb 6

Thanks Oscar and anyone who hasn't turned off their screens in horror.


Half-time round-up:

The ASX plunged to a four-month low as a violent correction swept global markets, sending the Nikkei down 5% and the Dow to its heaviest ever points loss.

The ASX 200 fell 198 points or 3.3% to 5828, erasing its gains for the year and returning to a level last seen in mid-October. A loss of this scale would be the largest since at least September 2015.

The biggest hits landed on the energy sector, down 4.6%, IT -4.5% and consumer discretionary -3.9%. The financial sector lost 3.6% and materials 2.6%.

The carnage came as a rebound in US equity futures faded following a torrid overnight session on on Wall Street, where the S&P 500 shed 4.1% and the Dow 4.6% or 1,175 points after briefly tumbling 1,600 points, the largest intraday points fall ever recorded. S&P 500 futures were recently down 29 points or 1.11%, dampening hope of a recovery tonight.

"The day started out fairly orderly, but somehow it took a turn for a worse, and then panic set in," Randy Frederick, vice president of trading and derivatives at Charles Schwab in Texas, told Fairfax. "There may have been some pretty sizeable program trades that were clicked in. It just looks like some institutional program selling."

The rout continued in Asia this morning, where Japan's Nikkei lost 5.02%, China's Shanghai Composite 1.45%, Hong Kong's Hang Seng 3.05%.

The Reserve Bank met this morning and is due to release a statement and any change to the cash rate at 2.30pm EST.

Crude oil futures dropped 66 cents or 1.03% this morning to US$63.49 a barrel. Gold futures improved $4 or 0.3% to US$1,340.50 an ounce. The dollar was buying 78.64 US cents.



So the correction continues apace. The best thing is it's happening quickly, which - trust me - is better than a grinding bear market. Short, sharp corrections bring value back into the market for those trading on fundamentals, and offer good entry opportunities for those relying on technicals - or at least they do once technicals work again, which they often don't when panic takes hold. I see a few dipping their toes already. As others have pointed out, there is no real rush unless you have a long horizon. Yes, you might miss the absolute lows, but you can lose way more money buying too early than you'll miss buying too late. Wall Street is due a sharp bounce but there is no guarantee that will put an end to this period of heightened volatility. Trading: trickier session today. Trades that went well: ANW, AC8, ARE, LTR. Trades that went awry: ARE (didn't sell all), BGS. A positive session but a long way from perfect.