Stock futures are trading almost flat as investors monitor further tightening of coronavirus restrictions around the globe. In addition to this, there is no doubt that there are genuine concerns about lofty stock valuations among traders and investors. They firmly believe that a healthy correction in the stock market is strongly on the cards.
No one is saying that the stock market is going to crash; that is not the discussion yet. The reason is that there is a firm belief that central banks around the globe are going to continue to keep providing their support, and this means that the dovish monetary policy is likely to stay here for a while. For instance, it doesn’t seem for the time being that the Fed is going to move the needle on interest rates. Thus, the interest rates are likely to stay at zero.
All the major US stock indices closed in negative territory, and the sell-off was primarily driven by the tech sector yesterday. The Nasdaq index took the biggest beating and closed lower by dipping 1.25% yesterday. The Dow Jones Industrial Average fell by 0.29%, while the S&P 500 declined by 0.66%.
Investors will continue to pay attention to economic data more closely, and the thing that is worrying them the most is the double-dip recession due to the rise in the Covid cases, which has led to the tightening of coronavirus restrictions. There is some evidence that these concerns among investors have some basis, because the US labour market has lost its mojo, and the US Consumer Confidence and Consumer Retail data have both seen sharp declines. If President-elect, Joe Biden, does what he says he will, and that means bringing a new stimulus package numbered in trillions of dollars, we could see economic growth picking up steam again.
In terms of currencies, we are experiencing a sharp bounce back in the dollar index, which has been under tremendous selling pressure for some time. There were no doubts that a reversal for the dollar index was coming soon. The EUR/USD has come off its highs of 1.22, but the Euro’s correction may not last that long.
As for the commodity prices, we are seeing some life coming back for the gold prices on an intra-day time frame. The reason is pretty simple; the ‘risk-on’ trade has lost some popularity, and this has driven the stocks lower. In addition to this, rising tensions in Washington isn’t helping anyone, and this particular factor is also making investors adopt a more cautious tone.
In the cryptospace, it seems like the healthy correction may be nearing its bottom. Bitcoin prices have been holding above the $30K price level. There is no reason why it may not move below this critical support zone, but the fact is that the Bitcoin price is still massively up for the last 52 weeks. It is much easier to talk about good things when the market is rising, but it isn’t easy to convince the general group of investors why Bitcoin will move up again. On the 30-minute time frame, the first bullish signal has emerged as the price has moved above the 50-day SMA, and if its stays above that price level, the Bitcoin price is likely to move towards the all-time high.