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  • Fed fails to support bullish sentiment and equities are on the back foot.
  • 5502 comes as a compelling level to the downside, around a 38.2% Fibonacci retracement.

Markets haven’t received the Fed’s latest pronouncements too favourably and have taken the Fed’s promises as rather empty with them selling off during the press conference.

  • Wall Street Close: Powell-put stalls despite the dovish road-map

Stocks on the Australian market have slipped and reacted in kind. 

We saw a more than one per cent drop in early trade in the ASX 200 Index after a bearish outlook by the US Federal Reserve hit sentiment. 

The Fed’s Chairman, Jerome Powell, brought the roosters home to roost for the stock markets when he said that millions may not get back to their old jobs (not inside the same industry) – talk about throwing cold water over a positive. 

ASX 200 Index falling in synch with Wall Street 

The ASX 200 benchmark index was lower by 70.3 points, or 1.14 per cent, at 6078.1 points after the first 30 minutes of trade on Thursday. The index currently stands at 6,070, -1.26% at the time of writing. 

The financial sector has been leading the decline on Thursday, down 2.40 per cent, while the energy sector was lower by 2.29 per cent.

The big banks were all trading sharply lower with the ANZ falling 2.84 per cent to $20.17, the Commonwealth Bank dropping 1.93 per cent to $70.22, NAB falling 2.68 per cent to $19.62 and Westpac sliding lower by 2.79 per cent to $19.15.

Well on the way back

Analysts at ANZ Bank argue that all signs are indicating that Australians want to get back to normal activity. “People are out and about, booking restaurants and looking for places to visit. They are searching for cars to buy and thinking about home renovation.”

Although there may still be some concern for the economy, there are other signs Australians are feeling reasonably confident. Seasonally adjusted searching for car sales has surged in the last few weeks and remains elevated (Figure 9). Given cars are such a big ticket item for households, this is a positive sign that Australian are feeling more confident about their economic future.

ASX 200 Index levels

The bulls had broken the 61.8% Fibonacci retracement of 6124 and that should not be taken lightly. However, bears were looking to the US markets for a correction if the Fed failed to appease the bulls. 

At this juncture, it will be prudent to monitor the S&P 500 closely:

  • S&P 500: Futures heading to test a critical daily candle, if it breaks, a 61.8% retracement will be earmarked, and much more

5502 comes as a compelling level to the downside, around a 38.2% Fibonacci retracement.  A continuation, however, will open prospects for a recovery to the 6300s.

 

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