Wall Street continues to wobble

Increased volatility is highlighting market uncertainty, as the Dow continues to give back most of the last two months’ gains.

The past week has seen Wall Street fire off a couple of decent days in which it has tried to get bullish momentum back into the markets. However, these days have immediately been followed by selloffs equalling or beating the gains made.  

So what has changed from last year? Well, the obvious answer is the two cuts made to the Fed’s debt-purchasing scheme. These, of course, still leave the markets benefiting from a sizeable amount of the $65 billion scheme, which is ultimately finding its way into equities. However, the gradual removal of the safety net supporting the equity markets has dented confidence levels of the buy-on-dip bulls. At the same time, US equities are once again hitting earnings multiples last seen in 2007/2008, raising renewed questions about whether market valuations are warranted.

Since mid-January we have seen the Dow Jones break below the 50- and then the 100-day moving averages. Any move below the 15,600 level could well result in the index cracking through the 200-day moving average too. As long as we don’t break below Friday’s intraday low of 15,604, we could well see a short-term rally back up to 15,700. However, traders should remember that we have the non-farm payrolls due later in the week.  

Wall Street chart

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.