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Markets fall as Fed raised US interest rate from 2.25% to 2.5%At its lowest the Dow fell over 4% following the announcement (its lowest point in over a year) of which it has now seen a small retracement.

Fed on tap: It’s a commentary written on the fly this morning, as developments out of this morning’s US Federal Reserve meeting are being digested by markets. The Fed has hiked rates just as they were expected to do, with market participants now trawling through the fine print in the Fed’s commentary. We were expecting a “dovish hike”; what we got looks like a “less-dovish than-expected-hike”. The dot plots were revised as presumed: the Fed has told the markets that it expects interest rates to be lifted twice in 2019, rather than the three-times implied in the September dot-plots. It also downgraded its growth expectations and hinted unemployment is likely to pick up in the medium term. Overall, though, at first glance this looks like a Fed reasonably content with their policy position, as well as the position of the US economy.


First responders: Price action in markets have been interesting. The message being delivered by the Fed is somewhat curious. Initial judgements are that they’ve struck quite an effective tone, albeit one that was probably different to that which was implied in market pricing prior to the event. US stocks are paring their gains for the day; volume has returned to Wall Street, after being below its average for most of the session last night. The NASDAQ is in the red presently: momentum stocks (read: information technology firms) are being hurt by the “less-dovish” Fed. Investors don’t want to buy into growth, it would seem. The intraday trend is pointing to a down day for Wall Street, though naturally that could turn in the next hour-and-a-half.

Bitcoin could have bottomed as its priced stabilized after the big disappointment it gave earlier this year.

US Fed watch: The US Fed meeting has been kickstarted and the markets are shuffling around in anticipation. US equities at time of writing are putting in a mixed performance, though al major Wall Street indices remain trading below key technical levels. It comes following a day in which Asian and European markets sold-off in sympathy with Monday night’s rout in North American shares. A desire for safety has supported a bid in US Treasuries: they are higher across the board. Interest rates traders are also grinding away, pricing out point-by-point interest rates hikes from the Fed in 2019. The US Dollar has dipped as traders take safety in other haven currencies: the US Dollar Index is below 97, mostly courtesy of a play into the EUR and the Japanese Yen. The weaker greenback has provided a lift in gold prices, with the yellow metal trading just below support at $US1250 per ounce.


The Fed’s biggest critic: Everyone has an opinion on what the Fed ought to do, it seems. The most powerful voice of all, US President Donald Trump, has certainly weighed in on the subject, Tweeting: “I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!” Never mind that President Trump’s policies, from major tax cuts and his trade war have contributed to the Fed’s invidious position. The President clearly is noting his concern about one of his hitherto favourite measures of personal success: the health of the US stock market. Whether rightly or wrongly, market participants, as contained within the price action in global markets, appear to agree with President Trump.

On the back of client feedback we now offer the possibility to customise the RSI levels on desktop and mobile devices. To do so, click on the RSI label once you have enable the indicator on your chart. This will open a dialog box that will allow you to change the levels (which are set at the default levels of 30/70), as well as customise the period and the colour of the lines.

Trend of boring FOMC meetings likely ending tomorrow, expect significant USD and index moves through the rate decision. 25 bps rise expected but by no means certain, Trump already on the warpath.

The FOMC will begin its 2 day meeting today, with the markets expecting a 25 basis points interest rate increase upon its announcement on Wednesday, which would make this its fourth hike this year. 

ASX yesterday: The ASX200 put in a very respectable day's trade yesterday. It was looking gloomy at the outset. Market participants were preoccupied with the economic struggles in China and the Friday sell-off on Wall Street. However, the 32-point drop forecast for the Australian market didn't materialise, providing scope for the index to cling-on to the 5600-mark, and forge gains throughout the day. The Australian session ended with the ASX200 1.00 per cent higher. It must be remarked that though positive, it was a day of light news and thin trade. The MYEFO release, coupled with BHP's share buyback and special dividend boosted sentiment, but volumes were quite some way below average, signalling a lack of conviction behind the day's rally.

ASX today: The gains look quite certain to be unwound this morning, however. SPI futures markets are indicating a 90-point drop for the ASX200, taking us almost squarely to where we were ought to have opened yesterday morning. The Wall Street chaos appears an inescapable lead today. It'll be touched on in a moment, but US shares a copping a battering (again) to start the new week. Financials and growth-stocks might be the barometer today. The banks are receiving a belting, falling yesterday even within the market's overall rally. US tech is heading the losses on Wall Street, as are health care stocks, following a ruling by a Texas judge that Obamacare is illegal. Using recent history as a guide: this is a generally solid indicator that Australia's technology and health care space will be shorted today.

Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 17 Dec 2018. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect  your positions, please take a look at the video. 

It seems the weather patterns behind the Brexit seem to changing at a more rapid clip – always ending up back ‘in irons’ (pardon the nautical terminology) as the clock steadily winds down to the March 29 separation. This past week, was particularly momentous with the Prime Minister’s proposal supposedly going to vote in Parliament; but May decided to pull the vote before the allotted session as it was clear it would be voted down handily.

Theresa May is coming under increasing pressure from MPs to stop the gridlock on Brexit negotiations.

2018 reaches a climax this week: It’s effectively the last serious trading week of the year, and the economic calendar reflects that. Indeed, there’ll be a handful of days between Christmas and New Years to keep across, but with little news and thin trade, it’s tough to imagine anything coming out of them. The markets are still ailing, with the bears firmly in control of price action. There’s so many risk-events coming up this week, traders with a bearish bias are surely salivating. They did well to knock-off US equities in the final round of last week: the S&P500’s 1.9 per cent loss on Friday ensured another down-week for Wall Street. How this year is remembered and how next year will begin will in no small way be revealed in the next 5 days: if you’re a financial markets buff, it’s exciting stuff.


Economic data: Concerns about future global economic growth tightened its grip on market participants last week. A slew of fundamental data was released across numerous geographies on Friday, and most of it was quite underwhelming. European PMIs undershot expectations, probably attributable in a big way to the impact of being caught in the middle of several domestic political crises and the US-China trade war. US Retail Sales data printed very slightly above expectations, to the relief of many, showing that the almighty US consumer is holding up well – at least for the time being. But it was a very soft set of Chinese numbers that had the pessimists tattling: the spate of economic indicators released out of China on Friday afternoon proved once more it’s an economy that is slowing down – and hardly in a negligible way.

European Commission President Jean-Claude Juncker stumped Theresa May's effort to renegotiate on a key Brexit withdrawal point, namely the Irish Backstop.

A (relatively) settled session: It’s been a soft day for global equities. With almost exactly two-hours to go in the US session at time of writing, another modest rally has apparently been faded by traders. Indications are that Wall Street will close lower. If proven true, this will punctuate a mixed day for Europe, and quite a solid day for the Asian region. The former found little impetus to be bid higher, while the Asian session showed the ebullience of diminishing trade tensions. Scanning the major indices, volumes were up compared to their 100-day average, however were slightly down when compared to their 10-day and 20-day average. It reveals a market that is more settled than what it has otherwise been seen during the global share-market correction – but remains vigilant and prepared to turn at the sight of bad-news.

Global growth: Given price action in last night’s trade was relatively more subdued, traders and analysts seemed able to take the clearer air to reflect on current market drivers. The theme that’s popped up consistently in the last 24 hours can be crudely articulated as “downside risks to growth”. It was a theme adopted by ECB President Mario Draghi during his press conference following last night’s ECB Meeting; and it was also referenced by PBOC last night in relation to China’s economic fortunes. It bears repeating: October, November and December in markets have been characterizes by bearishness, of course. However, the causes throughout this period have shifted. What was initially a sell-off catalysed by fears regarding higher US interest rates has transformed into one driven by fears about slower global economic growth.

Prime Minister Theresa May won a vote of no confidence in her leadership of the Conservative party last night. The results showed that Mrs May won the vote by 200 to 117, securing 63% of the total votes, she is now immune from any further vote's of no confidence for a year.

What’s making headlines: There’s an hour and a half to go in the US session and global equities are up. Let’s assume they finish that way – there is plenty of room for clarification (and rationalization) late-on, if need be. Traders have taken the new green shoots in the trade-war and spun them into a positive narrative. Sure, the old green shots lay trampled below the new ones, but perhaps this time around the positivity will be given a chance to thrive. The other story hogging headlines in the financial press is the vote motion UK Prime Minister May’s leadership of the Tories. Market confidence has been shaken by that development, but as we wake-up this morning, the balance of opinion seems to be suggesting that May will win the day.

The data side-show: Politics is driving markets still, which is always dangerous – it’s often a distortionary influence on prices rather than a revealer of fundamental facts. However, the fundamental economic data that was handed to traders overnight supported their optimism. Arguably the most significant release for the week, US CPI figures delivered a bang-on forecast number. If you’re a bull, locked in an environment where there exists fear of a global economic slowdown on one side, and fears about higher global interest rates on the other, a moderate outcome to any data-release is welcomed. Fundamental data last night was light otherwise, with US crude oil inventories the next most important release. It overshot forecasts, but still showed shrinking supplies, which boosted oil prices and (at the very least) didn’t detract from the bullish sentiment.

Asia stocks were higher Wednesday morning; Nikkei 225 rising over 2%, ASX 200 up by 1.25% and Hang Seng Index around 1.36%. This was followed by the news of China to cut US car tariffs from the planned 40% to 15%, the same tax charge on car imports from other countries

The pattern continues: Wall Street indices have been swinging about madly again. The pattern continues: an open, a rally or fall, then a retracement or recovery. Today we’ve had an open, a rally, then retracement, then a recovery again. There were stories behind this price-action. Everything that happened overnight appeared perfectly explicable. One wonders though if the swings in trading activity are being overly attributed to headlines. Or perhaps it’s the case that higher volatility and sensitive nerves are leading to accentuated moves. Whatever the cause, fundamentally, the bears still have control of the equity market. There is a softer intensity to the selling on Wall Street this week. However, with the extremeness of last week’s moves having not been unwound yet, what we are seeing is sellers piling in on top of sellers, bit by bit.

ASX200: SPI futures have turned positive, after oscillating wildly during the overnight session. That contract is indicating a 17-point jump for the ASX200 at time of writing. Yesterday was a tepid but respectable day for Australian shares, managing to muster a 0.4 per cent gain for the day. Volume was slightly above the 100-day average and breadth was okay. Growth stocks led the charge, following US tech’s gains the night prior, with the health care sector up 1.7 per cent, courtesy of a strong bid for CSL and ResMed. The materials space was the biggest points score for the index, adding 8 to the overall index’s performance. The trend is still down for the ASX200, as it is with global equity indices presently. However, yesterday’s daily candle, combined with a bullish divergence on the RSI, suggests some buyers are re-entering the market in the short-term, potentially offering temporary upside to ~5700.

Trading in Asia was mixed as US shares stabilized overnight. In the meanwhile, the ongoing discussions between China and the US adds uncertainty.

Day 1 of 5: Monday looks like it may be one of those days where Wall Street hesitantly pulls itself up out of the dirt in the final hours of trade. There is just under two-hours to go in the US session, and at a high level, things appear not-too-bad. Let's return to America a little later. Whichever way we happen to end the first 24 hours of trade for the week, heightened risk, growth fears and bearishness is still driving sentiment. There has been no shift in market behaviour to indicate a market turnaround is upon us yet. If anything, the headlines regarding the macro-landscape added to the negativity. The data traders received was mixed; rather it was the numerous developments in the politico-economic sphere that inflamed trader's trepidation.

The Brexit tragicomedy: The big story overnight must be Brexit. This week ought to be about the state of Europe, and at its outset, it has been. If the potential consequences weren't so dire, the situation would appear comical – akin to some absurd, but all-too real life Waiting for Godot re-boot. First-up, the European Court of Justice released a ruling that the UK could unilaterally cancel Brexit and revoke its action of Article 50. UK Prime Minister Theresa May has dutifully shut down that notion. But things did get sticky when Prime Minister May announced she would delay a vote in Parliament of her Brexit bill, on the understanding she lacked anywhere near the required votes to get it passed lawmakers.

Make or Break for Brexit? There have already been so many twists and turns in the UK’s efforts to negotiate its separation from the European Union that that investors are getting dizzy. It is troublingly difficult to gain a reliable bead on a probable outcome for this stalemate, but the lack of time and dwindling hope of an outcome that will satisfy the majority of those involved raises the threat of a ‘bad’ outcome and even worse market response.

Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 10 Dec 2018. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect  your positions, please take a look at the video. 

The Dow will open lower today that its open price for the year following weak jobs data and the resulting sell-off of FAANG companies.

What is the EOM indicator?

An indicator that highlights the relationship between price and volume and is particularly useful when assessing the strength of a trend. As implied by its name, it is used to measure the ease of movement in price. It is a volume-based oscillator that fluctuates above and below the zero line.