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Markets go silent

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 listopad 2022
As the year is ending, markets are staying silent and getting ready for new sessions.

Yesterday's session was characterized by a substantial drop in the trading volume due to the festive days, which will be accentuated tomorrow, leading to a large part of the market closing.

The slowdown in the index movement continued yesterday with rotation from technology stocks to more defensive stocks.

The data for pending home sales that fell 2.2% in November contributed to the more negative sentiment of investors.

The Dow Jones index was the one that had the best performance as a consequence of the flows towards defensive stocks. The technological Nasdaq was the one that experienced the biggest falls, but even so, the movements were not very important given the lack of market activity.

In contrast, the European indices suffered steeper falls, pushed down by the worst pandemic situation and by the restrictive measures taken by European authorities, as is the case of the German DAX index, which fell around 0.50%.

 

The USD weakened against most of its counterparts in the foreign exchange market, which occurred despite the rebound in market interest. The yield on the 10-year American bond rose to 1.54%. 

Normally, there is a positive correlation between interest rates and the dollar, so yesterday's behavior can only be attributed to specific flows that deviate from the usual market correlations at the end of the year.

Oil also lost the correlation it had experienced with stock indices in the last week with rises to appropriate technical levels. The reason was the publication of inventory data from the American Petroleum Institute, which fell to -3,576M, below the forecast figure.

Technically, oil has already corrected to the resistance zone around 76.50, and that is also the 0.618% Fibonacci retracement level of the bearish leg of the entire month of November. A daily close above these levels would terminate the current bearish momentum.

Sources: Bloomberg, Reuters.

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Miguel A. Rodriguez
Miguel A. Rodriguez
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Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.