17th August 2022: Yesterday trading signals are given +3.068%; Futures decline in price; Suspicious jump of AMTD Digital; Chinese recession and expected stock bull market
Symbol: USDJPY; Type: BUY; Open Price: 132.895; Close Price: 134.129; Profit: +0.92%.
Symbol: USDCHF; Type: BUY; Open Price: 0.94246; Close Price: 0.94882; Profit: +0.67%.
Symbol: GBPUSD; Type: SELL; Open Price: 1.2224; Close Price: 1.20433; Profit: +1.478%.
Futures decline in price
US stock-index futures dropped as worries over the Federal Reserve’s aggressive rate-hike path trumped good corporate profits and China’s stimulus measures. This caused investors to sell off US equities. The decline in Nasdaq 100 futures of more than one percent indicates that a selloff in technology names will continue. As investors anticipated the Federal Reserve’s most recent policy meeting minutes, the dollar and rates on U.S. Treasury securities increased. Investors were looking for signals on how sensitive Fed policymakers are to weakening economic data. Wednesday was a down day for European stocks as investors turned their attention to the Fed meeting and inflation data from the UK. After a solid start, the Stoxx 600 had a downward trend as there were hints that the continent’s energy problem was worsening.
US index futures and bonds continued their downward trend as data revealed that retail sales were unchanged in the previous month. The yield on the 10-year Treasury note increased by eight basis points, while the rate on the two-year note increased by the same amount. Treasuries were sold off, resulting in the decline.
Suspicious jump of AMTD Digital
AMTD Digital’s increase of 2,221% after it was listed in New York is comparable to the spike that GameStop Corporation had during the height of the meme-stock hysteria. One analyst has referred to AMTD Digital as “the mother of all shorts,” The company’s leader is currently fighting a suspension from Hong Kong’s securities industry. Because AMTD has such a small free float and low turnover rate, it is prohibitively costly for short sellers to borrow shares. After an unexplained surge that reached over 32,000% at its highest point, AMTD Digital has had investors on Wall Street scratching their heads. Other entrants from Hong Kong or mainland China have also generated gains that defy explanation, drawing the attention of regulatory authorities in the United States. On Monday, Tellimer Ltd. established itself as the first and only brokerage firm to commence coverage of the company by providing it with a sell rating.
Chinese recession and expected stock bull market
The central bank has no option but to relax monetary policy since the devil is in the details. Since 2008, returns on efforts to stimulate the economy by expanding credit have been steadily decreasing. Investors should be prepared for more negative news if the situation continues to worsen. This article with the following opening was published in the People’s Daily, the official newspaper of the Communist Party. It is anticipated that over the remainder of this year, the People’s Bank of China will emphasize maintaining price stability.
The year-over-year growth in China’s industrial value-added slowed to 3.8% in July, down from 3.9% in June, while the country’s exports in yuan increased to a 24% rise, up from a 22% gain. Investment in fixed assets decelerated to a growth rate of 3.5%, down from 5.8%, while growth in retail sales decreased to 2.7%, down from 3.1%. The decline in property sales was even more severe than the 18% drop seen in June, coming in at 29%. The expansion of private sector credit slowed to 8.6%, down from 8.9%, while building starts dropped by 45%. The figures were more than sufficient to debunk any euphoria that may have been caused by the easing.
At the beginning of the epidemic, China’s stock market became disconnected from the rest of the developing market complex, and this separation has only gotten wider over time. Companies are having a considerably more difficult time gaining access to money due to the visceral discomfort that foreign investors feel while doing business in China. According to Marko Papic, the interest rate on one-month bank notes has fallen to zero, indicating very little demand for borrowing. It would appear that China’s credit impulse has seen a significant decline, and this reduction appears to be widespread, despite being driven in particular by a decrease in yuan-denominated bank loans. The continuous repercussions of the decline in housing prices in China, which has been going on for over a whole year without stopping, is another issue the Chinese government must deal with.
It would be tougher to avert a worldwide recession if there was a substantial downturn in the Chinese economy, which should be terrible news for stock markets. It is troubling that the market has not responded much to the Shanghai Surprise thus far. The rebound in the S&P 500 is convincing since it covers such a wide range of stocks: Roughly 90% of the components of the index are now trading higher above their respective 50-day moving averages. If the rebounds in 2009, 2011, 2018-2019, and 2020 are any indication, this level has traditionally been a leading indicator of the beginning of fresh bull markets. The equity market may be able to stage its next leg of the rise, according to analysts at Ned Davis Research, who refer to the same technical indicators as the signal.
It is common practice to use the 61.7% Fibonacci golden ratio retracement to estimate the magnitude of corrective waves in equities markets. However, each relief rally typically recovers an average of 65% of the preceding loss. In the past ten years, the S&P 500 has had a loss of 0.26% on average between the close of trading on August 15 and the end of trading on August 22, which places it in the 22nd percentile of all one-week periods that occur during the year. Some evidence supports the hypothesis that relief rallies at the beginning of a bear market are more consistent than other rallies. The S&P 500 tended to digest gains after reaching the 50% retracement or recording a new bull market, as the average frequency of advance (FoA) was slightly better than that of a coin toss at 54%. This was because the intermediate passage frequency was only marginally better than a coin toss. However, the Fo As for the ‘500 were 77% and 69%, correspondingly two and three months later.
This leads us to believe that we won’t have a good idea of where we’re going until the dog days of summer are past. Keith Lerner, co-chief investment officer at Trust Advisory Services and chief market strategist, admits that the argument is considerably less apparent than the setup coming out of the 2020 market bottom. Following a period of indiscriminate selling, a period of indiscriminate purchasing on the magnitude we are currently experiencing has always been a leading indicator of more increases in the stock market over the past 25 years. In light of recent events in the stock market, it would appear that the bear market has come to an end; nevertheless, in light of the current phase of the monetary policy cycle, it is far too soon for a new bull market to emerge. This pandemic is expected to impact the world’s economy that is orders of magnitude greater than any that have come before it. Put your money on how things will turn out since there is, after all, a reason to have optimism in human nature.
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