With the announcement of the latest interest rate cut for the consecutive third time of the year 2019, US equity market indexes have all welcomed the decision. And two of them, Nasdaq and S&P 500 have charted new historical heights firmly into new territories (Chart A).
US Economic Updates
According to news analysis, the third quarter corporate earning of the US are various. Some said corporate reports are above expectation, some said mixed. The Fed went on to cut rate preemptively due to the fear of the ongoing trade war which could possibly causing US economy to slow down. Therefore, the market new historical heights created so far could be possibly artificially caused by the rate cut. With this round of cut, Fed interest rate left with around 1.5-1.75%% currently.
No one would know for how long this rate would stay, though the Fed chairman said he would like to maintain it for the time being. Looking forward in the long term, there would not be much more ammunition left shall the economy indicate a real slow down in the near future. This could pose a great danger for the next market downturn that everyone should know.
But nevertheless, we can conclude currently that there isn’t an immediate economy recession for the US economy for the time being. But the upside room for the US market indexes is also limited as well. If you have taken advantage to exit market, there should not be too much of a worry.
Gold Direction Update
For the gold index, it has taken advantage of the drop of USD in response to the rate cut. Gold has broken through its upper resistance down trending line (Chart B). Congratulation to those newcomers who have just joined in or those who have taken advice to top up on Gold fund.
In the near future, whether Gold index can travel further up above or sideway on currently level has to depend solely on whether the USD drops below its current level (sideway movement inside channel B) or remains in its current channel by travelling sideway (Chart C). This development will become clearer by next week.
Malaysia Market Critical Forecast
While back home in Malaysia market index, it is now facing a life or dead critical moment. Next week or so will be the judgment days. If it can shoot above its current resistance level at 1,600 and stay above firmly, it will have the possibility to reverse its bearish mode and travel north. Otherwise, it will drop back down and continue its bearish trending direction (Chart D).
If that is the case, good for those who have taken advantage to exit market. Look likely, the upside possibility is less likely due to the weak China economic data. China is the greatest trading partner for Malaysia. Second reason is also, Malaysia market has nothing attractive to draw investment, and thirdly, worst still, its Prime Minister has incurred some foreign controversies unnecessarily recently.
And fourth but not the least, there is uncertainty for Malaysia market future. Investors would not know whether there will be a change in the Prime Minister by next year. A change of leadership means a change of economic direction. Market does not like uncertainty. Whenever there is uncertainty, market index will drop bearishly.
All the above observations will have their verdicts by next week. So, hold on to your seatbelt and watch, folks, there will never be a lack of market excitement!
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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.