The relentless sell off in US equities shows that there is still severe trepidation in markets. Furthermore, the similar aggressive sell-off in all other global equities shows that the hysteria and risk adverse sentiment is still very strong and I believe it may continue to worsen. While there is no major macroeconomic direct event that has sparked the sell-off that is rivalling the worst month since 2008, the discourse has been centred around a looming recession in late 2019 and 2020, Trump's dilemmas in the trade war, rising interest rates as well as political turmoil in the EU (Germany's Merkel, Brexit, Italy's Budget). This has quite strongly negatively impacted world equities and investor sentiment has declined rapidly this month. What's worse is that the market is struggling to grapple on to some positive news. It is trying to find solace in , global macro data, mergers and acquisitions. However, the data fails to carry any positive momentum in the markets. This is an incredibly difficult time to gauge the strength of the market as traditional positive macro events and solid have always been superseded by 4-6 week aggressive bull run with little to no room for weakness. This is no longer the case.
As such, I believe its time to relinquish our reliance on and put a greater focus on fundamentals. The markets have pushed through all traditional indicators and overlays the past month and as such, they provide no safety net from falling further.
Also, try to be mindful of the fundamental and that spurted out by professionals traders, analysts and researchers. It was only the last two weeks when the consensus was to 'buy the dip' which was simply poor advice as the market fell by a further 4 -5 %.
The Nasdaq, just shy of falling 15% from its 01 .10.18 high, illustrates that our favourite tech tycoons are at the front of the sell-off.
Now, today 30.10.18 as of Australia UCT +11 time, DJIA has dipped past 10% and technically broken the long term lower lows from Feb '18 pull-back (yellow line on chart). While the break is not substantial, it may (50% chance) go lower and rival the dreaded 23000 mark. Despite this, an official 10% correction banner on CNN , Fox News, RT and of course other non-financial news outlets can easily alert the market and pusher equities higher as investors feel that are correction exceeding 10% is not warranted in the current climate and hence rebound for possibly the last leg of the bull run. Again, I'm not particularly sure which way it will go and I am definitely not confident taking any risks in equities this week.
From my point of view, equities are way too risky right now and I believe it is not a good idea to risk any capital trading in any equity class. I am going to sit on my hands for at least this trading week and reassess next Monday to gauge the market's momentum and direction. I am strongly embodying a risk-adverse sentiment for the month of November.