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Stock Markets – beware the false dawn

01/11/2018

Equity indices have picked up a little over the last couple of days, so is it now safe to get back on the wagon for the next surge up ? Well, and there’s no kind way to say this, but no, it isn’t. There has been a correction sure, but the most dangerous thing in trading is to assume that the first signs of of any move contrary to that is a signal that the correction is over. It is something of a cliché to acknowledge that markets are driven by greed & fear, but you will always see this manifested more strongly in falling markets. Despite the softening of Bearish sentiment evidenced by the oscillations of the MACD , what we are seeing here is prudent profit-taking and trimming of risk profiles. This may turn out to be a significant low but our feeling is that there are too many unknown factors to be confident about that, and for this very reason the Bears remain in control of the narrative for the foreseeable future. The decline in the benchmark Dow (WS30) during October was an impressive 8.7%, but with US Mid Term elections looming, and the problems of Brexit & China remaining unsolved there are plenty of reasons to remain cautious. The US Mid Term elections occur next week and it will be interesting to see how far the hysterical shrieking of the media chorus, with the occasional solo from an out-of-work actress or comedian, will actually influence real people. We await developments with interest.

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