Equity sell-off pauses for breath, direction still down
The global sell-off in equities appear to have paused a little today, but it isn’t really looking for a new direction. The trend remains down, and the market will consolidate and see a bit of profit-taking before that happens. The market is looking a little over-extended at these levels, but this pause is nothing more than a bull trap. Unless some significant new factor comes into play, further exploration of the downside is inevitable. It is notable that even companies reporting positive results are getting dragged down with the rest, suggesting that all the good news is already priced in, or perhaps even over-priced. Fund managers and other professional investors will be watching closely for further declines in anticipation of picking up some bargains, but they will also be wary of rushing in too soon. We feel that sentiment is now more nervous than actually negative, but it doesn’t take all that much to trigger market moves when people are fearful.