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1ronnie

23,012 Posts.

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30/10/18

13:26

Post #: 36314239
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Originally posted by 1ronnie ↑

The US Dow market started well, in fact about 200 points up at the start before reaching a drop of 566 points before staging a late recovery to close 245 points down. Nasdaq plummeted a further 1.63% on the back of falling Amazon and Netflix.

As I anticipate, this choppiness could last up to the Nov 6 midterm elections which could be the inflexion point for the market. Until then, it is important that S&P500 holds its strong support level at 2590-2600 which is just 50 points away from where we’re at 2641 about 2%. We would be in BIG TROUBLE if that support does not hold.

As you can see below, the S&P500 has broken through its bull run trendline. Stocks have violated the monthly trendline running back to the 2009 for the first time in this bull market.

View attachment 1348501
View attachment 1348503

A few issues may impede a sustainable recovery from here:

The outcome of the November mid-term elections – a resounding Democrat win could spell trouble for Trump himself and his administration

The upcoming US-China trade talks , if impasse continues, probably more US tariff imposition

The unwinding of tech exuberance mainly around the excessive FAANG stock valuation – which is already in progress

State of play in US bond yields

And in the short term, programme trading especially if key support levels get taken out in the days ahead

As for the local Aussie market, we must remember that the US market performance has well exceeded ours throughout the course of 2018 so a large US pullback may not ultimately result in an equal pullback on the local front. Yet, in times of such uncertainty, local stocks with no or minimal instos presence and low liquidity would likely bear a heavy brunt. I also believe that local tech stocks and yesteryear market darlings would continue to fall to a more reasonable level. So at this present time, it would be well worth paying attention to the multiples that your stock is trading at…multiples of sales (if no profit) and multiples of profit…and I suspect many have still lots of retracement to go as I forewarned since Feb this year.

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Folks, I repeat, if the US S&P500 breaks 2580 pts, we are in for a lot more pain. It attempted to do so twice early this year and it attempted again last night before the sharp recovery in the last hour of trading. Much really depends on how FAANG performs.
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