Talking Points:
- Prices have stabilized in Europe Tuesday after the selloff.
- While further losses are possible, so far this looks like a healthy correction rather than a new bear market.
- In this webinar, DailyFX Analyst and Editor Martin Essex looked at market sentiment and the likely direction of asset prices after the stock market plunge and subsequent recovery.
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Asset prices have stabilized Tuesday after the plunge in stocks that raised fears of a new bear market. While they may have further to fall, the latest price action suggests that so far this looks more like a healthy correction than the start of a slump.
In Europe, stock markets are more stable and futures prices suggest relatively small losses when Wall Street reopens. US 10-year Treasury note yields are below Monday’s four-year highs and there has been little sign of panic buying of the traditional safe havens such as gold, the Swiss Franc and the Japanese Yen.
USDJPY Price Chart, 10-Minute Timeframe (February 5/6, 2018)
IG Client Sentiment data are currently sending out bear signals for the US Dollar against the Euro, the British Pound and the Japanese Yen, although not gold, and a bullish signal for Wall Street. However, CNN’s Fear & Greed Index has moved from “Greed”, suggesting investors are putting more money into the markets to “Extreme Fear”, suggesting they are reducing their exposure.
--- Written by Martin Essex, Analyst and Editor
To contact Martin, email him at martin.essex@ig.com
Follow Martin on Twitter @MartinSEssex
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