The Big drop overnight yesterday in the US markets became headlines over major news carriers causing some attention or fear from investors worldwide. However, a closer look at the chart would tell that the drop was not a severe phenomenon but rather it was merely a “buyer protest” of their disappointment over the mixed or confusing messages between the White House and Beijing in regards to the trade war truce recently made. The drop was just giving back partial market rises from what was supposed to be the hope of a trade war settlement as expected by Wall Street. The drop has not even reached the bottom from where it rose for Buenos Aires hope.
Major market Developments
Looking at all three major US markets, sideways movement is all what investors should expect from now. A clear range bound distance as shown with red arrow can be easily seen in all three major US markets. Any breakthrough from the upper resistance or breakdown from lower support would be showing new direction created.
For China market as represented by Shanghai Composite index, it was all bearish since February this year. However, a noticeable new trend is emerging from October lately. It seems to indicate that it has reached a bottom at October 18th at 2,486 level. Shanghai market is travelling sideways since then and showing a bottoming up struggle. The question of whether a new direction can be possibly formed from bearish to bullish remains highly doubtful. Because trade disputes between China and US is still highly divided. Any drop below the previous low will make China market continues to travel further south on its bear ticket.
For Malaysia market alone,the trend is not looking pretty. Because of the drop in oil prices and the lack of new government direction, worst of all, the government continues to blame on its predecessor for the debts accumulated, investors are now getting doubtful for the ability to recover financially. Range bound between 1650 and 1750 is mostly expected at this period of time unless something new is being developed.
At conclusion, global markets would most possibly have been topping. Sideways movement is the most boring moment for any investors from this time on. It takes another unusually strong commitment for the market to move up. It would possibly much easy to drop down than moving up instead when we consider the exhaustion of the US corporate tax stimulus implemented since early 2018.
I believe it would be wiser to lower your capital, if not totally withdraw from market exposure whenever market moves to its high swing. Unless you are willing to experience the feeling of capital loses and you still remain positive for a trade war deal settlement,you can wait until it drops below its previous low or official announcement of the arrival of decadal economic recession.
Keep watch on how market turns itself in the next few months!
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The view and opinion expressed are personal views of the author and are subject to change based on market and other conditions. This write up does not constitute sole advice for investment decision. Investors are advised to do further reading and research to conclude individual decision.