Last week was, without doubt, an especially humbling week for many equity market speculators. It left me questioning the integrity of the current elevated levels in world stock markets. It also had me wondering about the legitimacy of “technical analysis” as a trading aid. And it bolstered my belief that currencies are a valid alternative asset class.
On Monday, the much heralded “unicorn” IPO of office space rental company “WeWork” was postponed. Perhaps indefinitely! In a few short weeks, a much-vaunted opportunity (which at one stage had a potential valuation of $40 billion) has fallen out of favour. It’s difficult to assess value for the company now as it urgently looks to cut costs and has a real risk of running out of cash.
On Tuesday, retail brokerage Charles Schwab gave us a hint that markets may be turning as it introduced a cut in its commission charges for trading online stocks to zero. Its stock took a hit of about 8% and its competitors in the sector saw their stock prices fall in tandem. Rival TD Ameritrade’s stock took a near 25% hit in an instant. Hence my cynicism about technical analysis. I doubt any TA guru past or present could have envisaged such a fall in a stock price by studying a chart or by using any TA tool.
Wednesday and the UK FTSE had its biggest one day fall since 2016. Recessionary fears were quoted as the reason (although obviously short term as the FTSE rallied on Friday). Lacklustre US data and US democrats upping impeachment pressures on President Trump also had their impact on markets.
To this week and the main events are minutes from the recent FOMC and ECB meetings concerning US and Eurozone interest rates. We also look forward to the US consumer price index inflation gauge and Canadian employment numbers. Fed Chair Powell is out and about in Denver and Kansas and Bank of England Governor Carney has flown to Tokyo to speak about climate change.
Wednesday’s Fed minutes of its meeting on 18 September is the highlight of the week. They are meaningful to the degree of composition of the vote and also strength of argument for or against further cuts. By now, I believe the Fed is re-establishing its independent voice and maybe less reactionary to the continued critical opprobrium voiced by the US President.
September’s CPI release on Thursday is expected to reveal a slight rise in US inflation to 1.8% Year on Year. Friday’s Canadian employment report is likely to be more modest than last month’s magnificent gain of 81,100 new jobs created. September’s figure is likely to show a gain of about 8000 new jobs with the unemployment rate remaining at 5.7%.
Currencies and Gold remained relatively stable last week-the Australian dollar taking a small hit after the RBA cut Australian interest rates to 0.75%. The British pound had a positive week as a possible Brexit solution was proffered by UK prime minister Boris Johnson.
Bitcoin fell below 8,000. Absent any huge shocks, this week will see more of the same.
Good luck and good trading! Ben Robson
Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You can Too.
