02.12.2021: Do you know what deep correction is like? (S&P500, DXY, USD/CAD, BTC/USD)
The US stock market tumbled again yesterday. This has happened for the third time in the last four trading days. Despite feeble attempts to gain ground, large investors decided to take advantage of these upticks for massive selling. Watch the video to find out the reasons behind the current state of affairs.
After yesterday’s decline, the S&P 500 fell to a 50-day moving average and closed below this level for the first time in 7 weeks since October 14. A 50-day moving average is a standard level for large investment funds to enter the market with long positions. Hence, investors who are betting on the growth can cautiously buy stocks at current levels. Nevertheless, the US stock market is still trading at the levels not far away from all-time highs. In the meantime, there is a fifty-fifty chance of a further fall and bounce.
Futures on the S&P 500 opened with a 0.5% gain today. At the moment of recording this video, the index was trading at near 4,513. Analysts expect a correction towards 4,530 – 4,580. Why do experts predict further growth? One of the reasons is positive data on US unemployment claims.
The US labor market is improving that means expanding industrial output and retail sales. In turn, it is too early for the stock market to develop a deep correction.
The US dollar did not echo the stock market in its decline. Investors always shift focus towards US Treasuries and the US dollar as traditional safe haven assets in the time of market jitters. So, the greenback is trading steadily at highs. Today its index stands at 95.90. Amid uncertain market sentiment, the index might dip to 95.50.
The USD/CAD pair is carrying on with its climb amid lower oil prices. Crude oil took a nosedive due to the fears that the Omicron variant would dent fuel demand. Nevertheless, oil prices are trying to regain losses on Thursday. The USD/CAD pair rose to 1.2790 facing strong resistance at 1.2800. Hence, the currency pair could retrace downwards. The expected corridor for the pair is between 1.2700 and 1.2820.
With the fourth attempt, Bitcoin managed to break the downtrend line at 56,000. At the moment of the breakout, risky assets halted a rally because of hawkish comments from Fed’s Chairman Jerome Powell. He said that it would be appropriate to terminate tapering QE program a few months earlier. Apparently, Bitcoin is likely to make some more attempts to break the level of 56,000 downwards and slip into a deep correction. Do you think it is a plausible scenario? Analysts do not dare to make ant forecasts. So, we would recommend waiting until the area between 56 – 58,000 is breached.
To sum up, analysts think that the US stock market will eventually rebound after a three-day losing streak. They believe it for a reason. The ADP employment report is fresh evidence that the US economy is in tip-top condition. The report showed that the US economy added 534,000 jobs in November. Besides, the ISM manufacturing PMI climbed to 61.1 and the consumer confidence index grew to 109.5 last month. Though consumers and the Federal Reserve voice concern about soaring inflation, robust hiring and high wages offset some negatives.
See you tomorrow!
00:00 Situation on the US market
00:24 S & P500
01:30 The number of initial applications for unemployment benefits in the United States
02:09 USD / CAD
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