For most of the US indices, the past week ended in the red zone.
On Friday, the S & P 500, NASDAQ Composite and Russell 2000 indices went negative, as strong quarterly data was offset by a 3.4% drop in the secondary housing market, to its lowest level since November 2015. You can also talk about the psychological factor that influences volatility, the 31st anniversary of Black Monday, 1987, when the stock markets collapsed.
While analysts continue to discuss whether the current sale is the beginning of a deeper correction or simply an opportunity to buy, many experienced traders and investors have identified the "dark cloud curtain" model during October. During the collapse of 1987, Dow Jones lost 508 points in just one day, which was one of the strongest falls in history.
Indices will go into minus, while defensive actions will be in the "green" zone.
On Friday, stock indexes initially rose amid strong quarterly reports. Securities PayPal (PYPL) rose by 9.4% after the company bypassed the forecasts of revenue and profits, and also raised its own forecast. Procter & Gamble (PG) grew by 8.8% at the expense of the best quarterly sales in five years. American Express (AXP) rose by 3.8%, showing better data than expected, and revising the forecast in the direction of growth.
However, some representatives of the market zeroed growth. eBay (EBAY) lost 8.9%, dropping to the lowest point since December 2016, after Stifel Nicolaus reduced its rating to "preferred to hold". DowDuPont (DWDP) fell by 1.9% after the company reduced the value of its agricultural assets by $ 4.6 billion. American International Group (AIG) lost 2.9% after news that the company is likely to uncover failed quarterly data with a loss of $ 1.7 billion from natural disasters of Hurricane Florence in the US and typhoons Joby and "Tram" in Asia.
In general, the S & P 500 per week sank only by 0.04%. However, the last day of the trading week was the third day of decline. At the same time, the index found support on the 200-period moving average, as well as from the still-emerging "bearish" flag, right below the trend line, which has been rising since February 2016.
The defense sector in the face of consumer goods producers and utilities were ahead, and risky assets of secondary goods and services were the leaders of the reduction, more clearly marking a decrease in risk appetite, which investors had already assumed.
The NASDAQ sank 0.48%, recording a third intraday reduction in a row, as well as a third weekly contraction of 1.29%. After the breakdown of 200 DMA during the morning rally, recorded on Friday, the index dipped below this level, where it opened.
Russell 2000 traded worse than the market, decreasing by 1.08%. This turned into a decline of 0.59% over the week.
The Dow Jones Industrial Average was the only index for which Friday turned out to be positive, it added 0.26%. Last week, it rose 0.41%, being ahead of all US indices and closing a three-day reduction. However, the index met resistance at 100 DMA.
Sales are still testing the current uptrend. It all comes down to strong economic data and revenue growth, on the one hand, and geopolitical risks, on the other. Conservative bidders should wait for confirmation of trend integrity, although more aggressive participants may look at these sales as rare buying opportunities with relatively low risk, as they see the lowest prices relative to the trend, which has been rising since March.
In volatile markets, the US currency rose 0.51% over the week. But on Friday, the dollar dipped 0.27%. Closing the trading week is a bad sign for several reasons. The dollar has formed a "bearish" absorption model below the broken uptrend line since May 14 for the second time and below the previous peak, since the beginning of October.
Thus, the market shows a growing deficit that could lead to the next financial crisis.
Most likely, the loss of the dollar will strengthen the position of gold. Since last week, the precious metal has formed a bull pennant.
Increasing tensions between America and Saudi Arabia, caused by the disappearance of journalist Jamal Khashoggi, led to an increase in oil prices. The cost of raw materials fell after the growth of US stocks by 6.5 million barrels. At the same time, exports fell by 1.8 million barrels per day, based on data from the Energy Information Administration of America. The reserves of "black gold" rose sharply, despite a drop in production by 300 thousand barrels per day, to 10.9 million barrels per day, which, according to experts, is due to the closure of offshore platforms because of the hurricane Michael.
Despite the absence of a shortage of supplies after a significant increase in production and on the assumption of the opposite, the energy industry has been tense for the past six months.
The monthly report of the International Energy Agency states that global reserve capacity for oil production fell to 2% of world demand, and most likely, there will be an even more serious reduction. From a technical point of view, on Friday, oil found support above the trend level, which has been rising since June 2017.
Events that are waiting for this week:
Monday
12:30: US - Chicago Fed National Activity Index (September): expected to decline to 0.15.
Tuesday
07:00: Germany - Producer Price Index (September): prices are expected to rise by 0.3% m / m and 2.9% y / y.
14:00: Eurozone - consumer confidence index (October, prev.): Expected to decline to -3.0.
Wednesday
14:30: Japan - the index of business activity in the manufacturing sector (October, prev.): Is expected to rise to 52.6.
07:15 - 09:00: Business activity in the sectors of production and services in France, Germany, the eurozone (October, preds.): A decline is expected in the manufacturing sector of the eurozone to 53.1, and in the services sector - to 54.5.
13:45: United States - business activity in the services and production sectors (October, preds.): Growth is expected to 54.1 and decreased to 55.5, respectively.
14:00: Canada - the decision of the Bank of Canada at the rate: it is expected to increase rates to 1.75%.
14:00: US - sales of new housing (September): growth is expected to 630 thousand.
14:30: US - crude oil reserves according to EIA: an increase of 1.9 million barrels is expected.
Thursday
06:00: Germany - Germany's consumer climate index (Gfk) (November): a decline to 10.5 is projected.
08:00: Germany - IFO Business Climate Index (October): a decline to 103.2 is expected.
11:45: ECB rate decision: no policy adjustment expected.
12:30: United States - the volume of orders for durable goods (September): a decline of -1.1% m / m and an increase in the index excluding transport by 0.3% are forecasted.
14:00: USA - the index of pending sales in the real estate market (September): the expected rate of -0.2% m / m.
Friday
5:30: US - GDP (Q3, prev.): Growth is expected to slow to 3.3% q / q.
