Contrary to expectations, none of the yesterday’s events, including disclosure of some insights about the new tax reform, created an impulse strong enough to force the pair to make a breakout from the rectangle pattern.
Moreover, expectations of the upcoming release of information about the state of the American labour market led to formation of a minor symmetrical triangle pattern.
Central banks are moving towards the ‘QE exit’. The US Federal Reserve (the Fed) this month began reducing the total size of its asset holdings bought under successive rounds of quantitative easing (QE). The European Central Bank (ECB) has just announced a planned reduction in the value of its monthly asset purchases. And the Bank of Japan (BoJ) has been quietly reducing the pace of asset purchases since it began targeting bond yields.
There has been no crash or even a 3% correction so far in October. Halloween will be on the last day in October, the 31st. So there remain two more days for this Newsletter`s prediction of a market downturn to be realized. So far Wall Street has marked new highs in a narrowing market as tech stocks account for most of the advances. With the exception of the energy sector, earnings for the third quarter have not been spectacular, and the fundamentals already mentioned in previous Newsletters remain unchanged.
After making a breakout from the falling wedge formation, the yellow metal was expected to continue the surge at least until the clash with 200-hour SMA. However, a plunge in Euro amid the ECB meeting led to downfall of the exchange rate. As a result, it has finally slipped below the weekly S1 located at the 1,269.58 mark.
If global stock markets crash, does recession inevitably follow? No, is the short answer…
In a recent briefing Janet Yellen seems to have declared that she was surprised that inflation has been so low. Official statistics put inflation at 1.3% on an annual basis, far below the magical 2% that is supposed to be the be all and end all of Fed aspirations for northward heading prices.
For many years in the last two decades the Japanese equity market has been taken as a textbook case of secular bear market. Since the historical high of 1989 the Nikkei 225 stock index of Japan has been subdued by a prolonged downtrend that hit its lowest low in 2009 after losing about 80% from the high. Intermediate rallies had developed meanwhile, some of them were consistent, like the four years recovery started in 2003, but the although considerable +130% that followed did not reverse the secular trend that prevailed again thereafter whit a new deep fall.
During the last few months some central banks have done things which I applaud, while others have done things which I find both incomprehensible and incompetent. In the current climate, it’s easy to misread the markets.
