The big sell-off in the stock market, which traders have been waiting for some time, is here. Yesterday, traders started to punish the Big Tech on Wall Street, and as a result of this, we saw the Nasdaq index coming off its highs. The sell-off was across all sectors, and we did see the S&P 500 and the Dow Jones indices moving away from their all-time highs.
When we look at the US stock market or the European market stock market, there is no doubt that they went too far and too fast, and a healthy retracement was long due. The keyword here is a healthy retracement, and this is what traders need to pay attention to the most. This is because if we look at the overall economic indicators over in Europe and in the US, there is no doubt that they are not only well off from their pandemic lows, but they are also indicating that a strong recovery is in place. In addition to this, we also have the massive coronavirus vaccine programme taking place in the US and in Europe, and the success of this programme has boosted morale among investors who know that things are on the right track. Furthermore, we still have massive support from fiscal and monetary policies on both sides of the Atlantic.
Thus, it is important to remember when one looks at the current sell-off in the market that underlying factors have improved profoundly, and the current sell-off may not be anything but an opportunity.
For the record, S&P 500 futures traded 1.04% lower, while the Dow Jones Industrial Average fell about 34 points yesterday. Nasdaq 100 futures also came under pressure and declined by 2.55%. As for Asia, we also witnessed a sharp sell-off there as well which led to the Nikkei index decreasing by 3.31%. The Shanghai index dropped by 0.25%, while the HSI fell by 2.24%.
Over in Europe, investors are also picking up the momentum from Asia and Wall Street, and this means that major stock indices such as the DAX and STOXX 500 are likely to come under selling pressure.
In terms of the economic docket, we have the US JOLTS opening number, and the forecast is for 7.05M, which is slightly less than the previous reading of 7.37M. Remember, the labour market data is likely to gather most of the attention among investors and traders. They still remember the massive disappointment around the US NFP data that came out last Friday. In addition to this, traders will be gauging the stance of several important Fed officials who are slated to speak later today. The focus will be on what these officials make out of the recent US NFP data and their views of the US’s current monetary policy and economic recovery.
In the commodity market, traders are focused on risk-off assets such as gold. The fact that we are likely to see traders moving away from riskier assets today, we should see some more bullish bets coming in favour of gold price, meaning gold price may continue to climber higher. Speaking from a technical price perspective, the gold price is currently in a battle with the 200-day SMA on the daily time frame, and as long as the price stays above this average, we are likely to see the prices moving higher.