Markets remain seemingly stable, despite concerns over the new coronavirus, as it introduces an element of uncertainty as the weekend approaches.
China is taking a long break – from today to the end of the month – and with more and more infected cases reported worldwide, fears can easily be transferred to markets and make the situation more fragile.
The SARS virus has gripped the markets in 2002-03 for about 4 or 5 months, so if there are more serious threats than current ones (especially now with travel so much easier), things are likely to get worse quickly.
Nevertheless, the US indices managed to reverse their losses from yesterday and end the plus session, forming a price ation signal from a long pin bar near the 50th period. This has inspired investor confidence and so far the indices are in positive territory.
Due to the lack of large macro reports, my expectation is that this trend will persist and stocks record a strong session in Europe and the US (of course, unless a catalyst intervenes to quickly distribute cash flows at the end of the week).
DAX has been able to fill the gap from the previous session and is above its structural support (former resistance to last month’s consolidation), a clear signal of sentiment in Europe. The expectations are for a strong day.
Gold is still standing by, and this clearly shows the anxiety of traders. They are not ready to give up their exposures in safe havens, and that speaks for itself.
The balance between risk on and risk off is extremely delicate at the moment, and even at least it has the potential to tilt the scales in either direction.
Oil has made a major drop in the last few days, activating the HS figure, drilling and testing some line, obliterating all close supports in the process. Yesterday, there was a gain in the long-term diagonal support and the price action signal that the day candle will show at the end of the trade today will be important.
Trader Aleksandar Kumanov