Last night, something that everyone had long suspected happened. The Chinese doctors reported that the number of people who got the coronovirus is much higher than the real number. In one day, this number increased immediately by 30%. It was also noted that tests for coronovirus give a lot of errors. We also knew this, but for the first time the situation was recognized at the official level.
The S&P500 chart of the day
At night, it was possible to observe in real time how stock markets and oil were falling down. But what happened next? The American market opened and a new growth of indices began.
How could it be and what is happening in general? It’s all about the Central Banks. We remember the crisis of 2008, when the Fed spared money to rescue investment banks from Wall Street. The situation got completely out of control in just a few days. Subsequently, representatives of the Fed admitted that it was a huge mistake and it was worth solving the problem in the bud.
And as we can see, central banks learn from their mistakes. Now, with any movement in the world economy, markets are immediately filled with a huge amount of “cheap” and even free money.
What is important to understand? The situation can last a long time. And as long as it lasts, the more players will believe in it. Then, at one not very good moment in time, the terrible thing will happen, that no one will wait. Markets will start to fall, investors will buy on falling, and prices will go down further and further. Be extremely cautious and don’t let yourself get caught up in this trap.
OIL + GOLD
Why did we decide to combine these 2 different assets? Thursday was an extremely interesting day. Both gold and oil were growing, although it’s almost always the other way around. What is the contradiction? Actually, there is no contradiction. Gold has been growing since the night of the news from China. On the same news, oil fell sharply, and then began to rise throughout the trading day.
Major players were trying to make money from speculators who recklessly opened short positions on oil. These positions were fully calculable, which means that there is a great opportunity to play back.
With each passing day, traders found it harder and harder to make money from what had worked before (strong directed movements on the news). This should be taken as granted and try to work not from news, but only from price movements.
What is waiting for us today?
08.00 German GDP data for the 4th quarter.
11.00 EU GDP data for 4th quarter
14.30 US retail sales level in January
16.00 University of Michigan Consumer Confidence Index for February
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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.