#Blackmonday Analysis from a Trader Perspective

The #Blackmonday seems to be trending after the stock markets all around the world plummeted, sending the performance YTD into negative territory. The Dow had touched 1000 points loss before reversing, European stocks move lower over 3% in average, Shanghai stocks plummeted over 8% followed by other Asian markets. People are looking for answer to these events which remind us all to the 1929 depression and 2008 credit market bubble. But what is actually happening today that caused the panic sell off all over the world?

Various major topic are debated as the main culprit of the sell off, among them slowdown in China growth, anticipation of interest rate hike by Federal Reserve, commodity bear market, and the problems in Eurozone. The combination of these events along with bull market which sent the index touching a new high over the last years has been fuelling the crash that happened in the last week.

The situation however, is much different than 2008 collapse or Asian crisis in 1998. From the data released by US census we could see that employment is strong, housing data also show a strength over the last year, combined with stable to rising inflation. The market reaction tells another story, perhaps because the valuation of stock indexes has been too high recently. A price hike without an improvement in output will eventually lead to price correction, which is happening now. The PE band has been above the average for years and due to correction, the question to ask is, “how much correction until the market consolidate”.

As we all know that China growth has been slowing down over the past two years, but it is still growing at 6% which is much better than the world and emerging market such as India, Brazil, Indonesia. Yes, the manufacturing data shows contraction and imports declined as well which is why the commodity market has been sluggish since 2014. Oil price plummeted from $100 /barrel to below $40/barrel, copper, gold, and soft commodities also plummeted. This show risk aversion among investor and trader, which sent JPY to its recent high and commodity currencies to its recent low.

Debate among Federal Reserve member also cause market volatility, with every data released fuelling speculation among traders to when the interest rate hike will happen. Although yesterday, Lockhart said that issue in China will impact the policy, he was still sending a message that September hike is possible. However, the T-notes data shows different message, with March 2016 the possible rate hike to 0.375%. Also, a rate hike too soon will slow the economy in US and the shadow of deflation is haunting.

Perhaps this time, it is not a depression as we fear it, but just a market correction with no clear underlying cause. Simply the price has been too high and unsustainable for the market to rise further, so the US market consolidate for 9 months and due for a correction which is happening. The question in sight is how much correction will happen this time and if catching the falling knife now is a good reason for the next several months. It is not a matter if it would happen but rather when it would happen, and when it does happen I hope we are all ready to profit from it.

Published by Journeyman

A global macro analyst with over four years experience in the financial market, the author began his career as an equity analyst before transitioning to macro research focusing on Emerging Markets at a well-known independent research firm. He read voraciously, spending most of his free time following The Economist magazine and reading topics on finance and self-improvement. When off duty, he works part-time for Getty Images, taking pictures from all over the globe. To date, he has over 1200 pictures over 35 countries being sold through the company.

3 thoughts on “#Blackmonday Analysis from a Trader Perspective

  1. Akibat black monday batasan AR bawah di ubah menjadi 10 % buat semua range harga, hati – hati masih ada kejutan selanjutnya siap – siap ajah melihat harga saham yg di buat AR bawah tiap hari tanpa sempat para trader menyelamatkan diri ( cash is the king ), tidak peduli sebagus apapun pohon yg anda tanam dan pupuk yang anda beri jika musim rontok telah tiba semua pohon pasti akan merontokkan daunnya untuk kemudian kembali menjadi pohon yang lebih indah lagi di musim semi berikutnya.

    Liked by 1 person

    1. Setuju bro, hari ini juga rebound technical saja terlihat dari keengganan pasar bertahan di level 4300. Yang agak aneh futures US market naik besar, sepertinya rebound technical juga walaupun besarannya di luar kewajaran. Menurut bapak bottomnya di IHSG level berapa pak? Thanks

      Like

  2. Kalau saya pribadi terus terang tidak pernah memprediksi market, karna menurut saya tidak terlalu penting bagi kita untuk memprediksi arah market ( bahkan ada satu joke even trader terbaik di seluruh dunia bahkan yg telah melewati jaman kita akan menertawakan anda jika anda menyibukan waktu anda untuk memprediksi arah market ) karna menurut pengalaman saya pribadi market itu bukan untuk di prediksi but we just follow the big trend of the market seperti yg pernah saya katakan even the very good stock will be falling down when the trend market is down but sebaliknya dalam keadaan bullish saham sejelek apapun pasti ikut terbawa arus kenaikan. ( kebetulan saya termasuk pengikut aliran just follow the trend ). That why i say saat sekarang ini lebih baik memegang saham gorengan yg terlihat di jaga oleh bandarnya example saya lebih memilih inaf jika dapat di bawah harga 100 dari pada kalbe farma di harga 800, karna saat sekarang ini kita lebih penting untuk mencari saham apa yang akan naik pada akhirnya nanti dengan persentase yg lebih besar bukan saham apa yg akan naik duluan.

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