The broad markets have continued their tumultuous run led by the Nikkei. For nearly a week global equity bourses have been volatile. The Nikkei has been front and center with whipsaw volatility as it has begun to run into a wall of doubters. It is starting to feel like the mid 1990’s when Japan devalued the JPY wildly and the Nikkei than began a roller coaster like ride which led to a long-term bear market.
Spanish and Italian Service PMI results have been published this morning with rather lackluster readings. And in a short while Europe will release its Revised GDP numbers. The jobless statistical parade will begin from the United States later this afternoon when the ADP figures are brought forth. Friday will see the Non-Farm Employment Change data from the States.
Japan may not cause a domino effect in the global equity bourses if it continues to decline, but it should act as a warning to any investor who has been counting on smooth sailing only. The violent trading that has been seen in the Nikkei index has certainly wiped out most speculative traders who were using leverage in order to try to profit. Certainly there might be a handful of lucky souls who have made money off of the gyrations, but the speed of the market has definitely left most participants uttering obscenities.
But this is a fireworks show that has been tentatively on the schedule for a long time. And now across the ocean, Wall Street is beginning to signal that it also may enter some rather difficult waters. While the three major indexes from the States have done remarkably well this year as has been said over and over again, this is not an equity bull run that is occurring because of encouraging corporate results or widespread positive outlooks.
Gold as of this morning is around 1399.oo USD. Crude Oil has consolidated near the lower parts of its short-term range. The commodity market on a whole continues to exhibit nervousness as demand remains diminished.
Again we are not calling for an apocalypse, what we are saying at Digital Markets Advisor is do not believe the hype coming from politicians who have a reason to sell the silver lined clouds to the public. Debt remains a startling problem for Europe, the United States, and some parts of Asia – specifically Japan. Combined with less than promising data the overall health of the global economies remains fragile. We urge caution while Europe remains mired in recession and the U.S. achieves less than promising growth.
The EUR is trading near short-term highs along with the GBP against the Greenback. The AUD remains under pressure as physical resources continue to display weaker values. There is little doubt the FX markets will continue to see a test of ranges while equities internationally spur on volatility. It should also be noted that the ISM Non-Manufacturing PMI reading will come from the States today along with Factory Orders data. Economic reports from the U.S. have been uninspiring and today’s outcomes should be looked at. However, traders need to keep in mind that reports that are negative actually may help bolster short-term speculators who believe that a bad U.S. economy means the Federal Reserve will be forced to stay in the quantitative easing game longer than anticipated. Does it make sense? For the time being it may pay to be a contrarian.