Who Let The Bears Out?
Today’s Spotlight Market? – The usually quiet trading month of August has seen a vicious roar from market bears as many equity and commodity markets have been rocked. Fears of a slowdown in China, as well as currency movements in emerging markets have caused many traders to head for the exits.
Fundamentals? – ? China?s devaluation of the Yuan set off corresponding moves by other countries. While Kazakhstan isn?t usually first and foremost on the minds of traders, the government of this very commodity reliant country abandoned control of the exchange rate of the Kazakhstani Tenge, causing an amazing 22% plunge in the value of the Tenge. In Malaysia, another commodity exporter, the Ringgit is now at 17 year lows. With commodity prices continuing to drop, including an intraday drop of Crude Oil prices below $40, there may be continuing pressure on the currencies of commodity exporting nations. Equity markets sold off aggressively last week and the S&P 500 index is now down more than 7% from the high on May 21.
Technical Notes View Today’s Chart? – Turning to the 3 month continuation chart of the S&P E mini contract, we see several bearish signs. The 20 day Simple Moving Average (SMA) crossed below the 50 day SMA. Both the 20 and 50 day SMAs are getting very close to crossing below the 200 day SMA. The 200 day SMA was previously providing support, which was broken through resoundingly on August 20. 14 day Relative Strength Index is at 27.11, in oversold territory.
————————————————————————————————
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control. Derivatives involve substantial risk and are not appropriate for all investors. Please read the “Disclosure Statement for Futures and Options” prior to investing in futures or options. For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and other risks apply.