A wall of worry has morphed into towering wall of pain
Indeed, a wall of worry has morphed into towering wall of pain as extremely fragile circumstance across the capital markets continues to undermine investor confidence. Markets continue to tremble but with traders suffering a severe case of the cold sweats as geopolitical risk runneth over, the unambiguous bias towards safe havens suggest the street is expecting this rout to deepen. In the absence of any tier one US economic to tether market sentiment, the bears are uncaged, and a bull is on the menu!
The pessimistic market view of China governments efforts to support market sentiment is a massive trigger after Chinese equities tumbled head over heels in today’s Asian session.
Gold moved higher hard today, embodying a full-out flight to safety. Near-term key resistance is holding for now around 1234-1236, where the 200-week moving average converges with the December 2017 lows but on break, this will severely test the existing structural short gold complex, and if a break is triggered we could see a short covering rally extend to $1250 in a heartbeat.
Oil bears are winning the battle despite the fallout from the killing of Saudi journalist Jamal Khashoggi. But I think its the knock-on effect. Saudi Energy Minister Khalid Al Falih says he would not rule out boosting Saudi exports by as much as 2 million barrels per day and that they would meet any oil demand due to the drop in Iran exports. Noise is set to get louder before the Iran sanctions are placed to take effect on November 5. While the Khashoggi saga appears to be far from over the thoughts that US-Saudi tensions could lead to a supply disruption are but a distant memory.
Also, market sentiment could take a knock as the market’s position for US inventory data, which have been rising well above markets expectations.
Currency markets
The Pound is entering that mode again, where no position is a good position as the negative headlines continues to compound extremely negative sentiment.
The Yen rallies on haven demand, but tremendous support remains at 112 which should keep USD/JPY downside in check at least until the traders have then next negative equity mood swing.