
Please try another search
While we predicted yesterday’s exuberant rally, we also said it won't last. We forecast the Fed will likely give in to rate cut demands, but will resist doing so, because it knows the action would be ineffective.
Nevertheless, Fed Fund futures are already pricing in a half-percent cut in March. On top of that, U.S. President Donald Trump had restarted his pressure on the Fed, encouraged by the Australian central bank's decision to cut interest rates by a quarter percent.
But why would a Fed rate cut be ineffective? First, it’s already expected. So, the Fed would have to really wow the market to reawaken its animal spirit — and it doesn’t have that much room in which to maneuver.
Secondly, and more to the point, the issue at hand is the coronavirus outbreak — and the world is no closer to managing it, never mind eradicating it. Growth is expected to be the worst since the financial crisis, as manufacturing lines and supply chains are thrown into turmoil.
Finally, we could see a return to a U.S.-Sino trade war, if China doesn’t honor its promises on the Phase One deal.
Also, from a technical standpoint, the fortunes of the Dow don't look good.
On the one hand, the MACD and the RSI are extremely oversold, with the latter reaching the lowest level since August 2015, while the price hammered out a support at the 25,000 support, both from the May 31 low and the uptrend line since January 2009.
However, on the other hand, bulls have to climb back up a jagged mountain after the price cut through the uptrend line since its December 2018 flirtation with a bear market, “protected” by the 200 DMA.
Conservative traders would wait for a new record, then a downward correction to the uptrend line before risking investing in this market.
Moderate traders may risk a long position after signs of accumulation above the broken uptrend line.
Aggressive traders would short upon the first sign of resistance, or above a presumed resistance, with a stop-loss calculated to provide a positive risk-reward ratio that fits their budget.
Trade Sample - Short Position
The trade idea of the year recently hit the financial media, and it's all about the "China Reopening." For those unaware of the situation across the ocean, the long story short is...
The market conditions experienced in 2022 were far from perfect for bond investors. Rising interest rates put pressure on the returns of fixed-income investments, and this trend...
Investing in international equities offers exposure to the potential growth of various global industries while boosting portfolio diversification. And exchange-traded funds (ETFs)...
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
I feel that this comment is:
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.