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Does the Stock Market Slump Represent a Buying Opportunity?

With a mass of individual factors coming together to hurt the global outlook, Bill Hubbard discusses the implications of the stock market sell off as volatility rises and traders cycle into bonds.

  • A major divergence between safe-haven bonds and peripheral yields on Eurozone growth fears and as US retail sales disappointed
  • Has the recent losses presented a buying opportunity or should traders wait for more of a rebound to be ‘on solid ground’?
  • With several Federal Reserve speakers ahead of the October meeting, the markets will be looking for their opinions to indicate possible direction
  • The slump in crude oil prices may continue as Saudi Arabia takes a more global view, but the declines may soon call into question the viability of US fracking

 

Spread Betting & CFD trading carry a high level of risk to your capital and you can lose more than your initial deposit. Only speculate with money that you can afford to lose. These trading products may not be suitable for all investors so seek independent advice.

Video content by Capital Spreads.

The contents on CleanFinancial.com are for information purposes only and are not intended as a recommendation to trade. Nothing on this website should be construed as investment advice.

Neither CleanFinancial.com nor any contributing company/author accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

Content provided by Capital Spreads which is Authorised and regulated by the Financial Services Authority. FSA register number 3218125.

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Why is This Sell Off Different to Previous Buying Opportunities?

With reduced central bank support, concerns over the German economy and falling oil prices, Michael Hewson suggests that the recent sell off might be demonstrating a significant shift in sentiment.

  • The Russell 2000 has broken below 1077 and may now target 1000
  • The S&P 500 has fallen below the 1900 level and there is potential for declines towards trendline support from the 2011 lows
  • German DAX had very strong support at 8000, but we have now broken lower and so we may target 7700

 

Spread Betting & CFD trading carry a high level of risk to your capital and you can lose more than your initial deposit. Only speculate with money that you can afford to lose. These trading products may not be suitable for all investors so seek independent advice.

Video content by Michael Hewson of CMC Markets

The contents on CleanFinancial.com including any articles or videos are for information purposes only and are not intended as a recommendation to trade. Nothing on this website should be construed as investment advice or form the basis of an of investment decision.

Neither CleanFinancial.com nor any contributing company/author accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

Content provided by CMC Markets. CMC Markets UK plc and CMC Spreadbet plc are authorised and regulated by the Financial Services Authority in the UK, registered offices, 133 Houndsditch, London, EC3A 7BX.

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How Has the City of London Changed in 50 Years and What Might the Future Hold?

In this trading video, IG talks to Market Commentator David Buik about how the City of London has evolved over the last 50 years and what the future might bring.

Mr Buik also discusses the UK’s relationship with the European Union, the potential impact of the foreign exchange fixing scandal and what the most influential events have been in the development of the City.

 

Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

Financial Market Comments from IG.

The contents on CleanFinancial.com including any articles or videos are for information purposes only and are not intended as a recommendation to trade. Nothing on this website should be construed as investment advice or form the basis of an of investment decision.

Neither CleanFinancial.com nor any contributing company/author accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

Content provided by IG which is Authorised and regulated by the Financial Conduct Authority. FCA Register number 114059.

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Is the Overly Bullish Dollar Due for a Pull Back?

With European data continuing to worsen but Nonfarm Payrolls beating expectations, Michael Hewson asks whether the dollar is looking overly bullish and due for a pullback.

  • Gold‘s triangular consolidation has key support at $1,180 but any move lower may encounter production cuts which should support the price
  • USD/JPY managed to hit ¥110 but reversed and may now target ¥106 on a break of ¥108
  • Following 12 consecutive weeks of decline, EUR/USD posted a ‘tweezer bottom’ which may encourage a short squeeze towards $1.27

 

Spread Betting & CFD trading carry a high level of risk to your capital and you can lose more than your initial deposit. Only speculate with money that you can afford to lose. These trading products may not be suitable for all investors so seek independent advice.

Video content by Michael Hewson of CMC Markets

The contents on CleanFinancial.com including any articles or videos are for information purposes only and are not intended as a recommendation to trade. Nothing on this website should be construed as investment advice or form the basis of an of investment decision.

Neither CleanFinancial.com nor any contributing company/author accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

Content provided by CMC Markets. CMC Markets UK plc and CMC Spreadbet plc are authorised and regulated by the Financial Services Authority in the UK, registered offices, 133 Houndsditch, London, EC3A 7BX.

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Will the US Dollar be Held up by Psychological Big Round Numbers?

The US dollar has had a huge run against almost every major currency and commodity but speculators, by their very nature, have to exit their positions at some point.

A host of psychological big round numbers (BRN’s) across the asset-classes may be a reason to suspect that this time could be now.

In summary:US Dollar Spread Betting

  • EUR/USD: $1.25
  • GBP/USD: $1.60
  • USD/JPY: ¥110
  • Gold: $1,200
  • US Crude Oil: $90

Fundamentally, the case for a strong dollar is still solidly in place.

As demonstrated by the strong 248k jobs growth in September, the US economy is on the up while global competition from the likes of Germany and China appears to be headed in the opposite direction.

However, with the US dollar having moved so far so fast, there may be some reasons to believe a correction could be around the corner.

EUR/USD ($1.25)

When EUR/USD was at $1.40, the highest level since 2011, ECB President Mario Draghi was concerned that the exchange rate was negatively impacting the rate of inflation in the Eurozone and began referencing extraordinary monetary easing.

The euro is now heading towards $1.20, the level at which Draghi said he would do ‘whatever it takes’ to uphold the Eurozone.

As a result, it seems likely that he will not be talking the currency down or introducing a full Quantitative Easing program in the foreseeable future.

No euro jawboning and no QE would remove a lot of the reasoning behind euro weakness.

GBP/USD ($1.60)

The Scottish referendum and the associated uncertainty have been and gone and, despite the recent slowdown, the British economy is ticking along nicely.

By many people’s estimation, the Bank of England will in fact hike rates sooner than the Federal Reserve, albeit possibly at a slower pace.

The assumption of a slower pace of hikes in the UK could be misplaced; there is a strong correlation between the strength of the pound and the UK’s Consumer Price Index.

The very fact that the pound has come down as much as it has, could mean an increase in import prices and see UK CPI tick back above the Bank of England’s 2% target.

Higher inflation would put pressure on the central bank to hike rates and as such be a positive for GBP/USD.

USD/JPY (¥110)

The Japanese government have targeted a weaker yen as part of Prime Minister Abe’s ‘Three Arrows’ to bring the Japanese economy out of stagnation.

However, recent comments from officials suggest that the government is a little concerned over the pace of the declines in the yen and the impact it could have on importers as well as confidence in the economy.

The current price levels for the yen probably already reflect any economic slowdown associated with the sales-tax hike, so if Bank of Japan Governor Kuroda decides to hold back on additional easing, further yen downside could be limited.

Gold ($1,200)USD FX Trading

Yesterday was the third test of $1,180 per oz for gold in just under a year and a half.

US GDP growth was very strong in Q2, but that is arguably an inventory build-up after the weakness of Q1.

If Q3 growth shows sign of slowing and the Federal Reserve remains dovish, especially if they keep the ‘considerable period of time’ comment in their statement, then the lower probability of a Fed rate hike could see gold recover as an inflation-hedge.

It’s also always worth considering that a major geopolitical flare up with lasting consequences on global trade, perhaps involving Hong Kong, would likely see a renewed demand for gold as a safe-haven.

US Crude Oil ($90)

Slowing growth in the Eurozone, China and perhaps soon Japan, have seen expectations for crude oil demand diminish.

However, should the currently implemented stimulus in Europe and China improve the economic prospects of those economies, expectations for global demand could pick up.

Another distinct possibility with lower oil prices is an OPEC intervention to stabilise the market.

If OPEC members, particularly Saudi Arabia, decide to cut production, then the supply-demand imbalance could even-out and further oil price declines may not be justifiable.

Conclusion

Investors will anchor their decisions around certain numbers even though they don’t necessarily mean anything about the investment at hand.

One example an investor will base decisions on is the price that they bought the asset, even though this price level is likely unknown and meaningless to the market as whole.

Another example is big round numbers like $1.25 and $1,200; it’s often at these levels that investors will reassess whether the reasons they initially bought or sold are still valid and make a decision on whether to close the trade.

Spread Betting & CFD trading carry a high level of risk to your capital and you can lose more than your initial deposit. Only speculate with money that you can afford to lose. These trading products may not be suitable for all investors so seek independent advice.

Content by Jasper Lawler of CMC Markets

The contents on CleanFinancial.com including any articles or videos are for information purposes only and are not intended as a recommendation to trade. Nothing on this website should be construed as investment advice or form the basis of an of investment decision.

Neither CleanFinancial.com nor any contributing company/author accept any responsibility for any use that may be made of the above or for the correctness or accuracy of the information provided.

Content provided by CMC Markets. CMC Markets UK plc and CMC Spreadbet plc are authorised and regulated by the Financial Services Authority in the UK, registered offices, 133 Houndsditch, London, EC3A 7BX.

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