- FANG stocks pushing the NASDAQ index lower
- BOJ under pressure to make a new decsion on its monetary policy
Investors should pay attention to one element; it is all about buying low and selling high as long as the fundamentals are strong. Feeble forward guidance is a matter of concern but it isn’t a strong enough reason to jump out of the boat. Similarly, during the earning season, when solid businesses miss the street expectations, their stocks get hammered. This presents an opportunity for those who missed the ride. We think investors should not forget this when they look at the FANG stock. Yes, they are getting banged but under no circumstances, they have poor fundamentals.
US futures and European markets are on the back foot again because investors aren’t showing any enthusiasm for the stocks. Tech sector has been the powerhouse for the bull rally since the financial crisis. For us, the current sell-off in the equity markets is an opportunity. NASDAQ is under the influence of this current sell of because the FANGs aren’t performing well and this is driving the full market down.
In terms of technical analysis, the price has crossed the 23% retracement level of Fibonacci and it is likley that it would conitnue to move downward and find support somewhere near the 50% mark. Interestingly, this is where the 100 day-day moving average is trading therefore the areas of 6900-7000 could be an interesting one.
In the currency and fixed income market, it is The Bank of Japan’s turn to make some noise in the markets. The bank without any doubt adopted very dovish stance towards its monetary policy for years and now it is considering to make a change. The bank’s balance sheet need some breathing room. The 10-year bond yield has already started to show its reaction.
Of course, it is in the bank’s interest to keep the bond yields on the leash, they do not want to undo all of their hard work. If you look at the economic numbers coming out of Japan, they are no longer at the same level where they used to be. There is a clear improvement in relative to a few years ago. Clearly, there is a need for change when it comes to the monetary policy.
But then again, today's economic number reminded the bank that they do not need to rush with respect to their monetary policy decision because the economy still needs help. The unemployment rate ticked higher today to 2.4% and industrial production also came a little soft. But again, we think traders are not willing to pay attention to this because the Japanese 10-year yield is still dropping and today we have witnessed a drop of 5BPS, most since June 2016.
The chart below shows that the price has dropped after forming a double top, a reversal pattern which is very known among technical analysts. The minor support is at 110.19 and if this support holds, then there are chances that we continue to move higher. The RSI is the downtrend but there isnt any buy or signal. The buy signal comes when the price is trading below the 30 mark and the sell signal triggers when the price trades above the 70 mark.