Looking for Relief
When U.S. markets are closed for holiday, such as what we see on Martin Luther King Jr., Day, yet the rest of the world is trading as normal, it gives us a good prediction of what we can expect in the U.S. once business resumes as normal. This is especially true in the realm of Forex trading, but stock traders can also get a good idea of how the next day will play out, especially in market conditions like what we are currently experiencing with the rest of the world experiencing similar selloffs like what is going on now.
Markets around the world are hurting right now, but the major one that is hurting the least so far in 2016 is the FTSE 100, the London based stock exchange. Europe’s indices are down, on average, around 10 percent, but the FTSE is only down 6 percent. That’s a performance even better than the S&P 500, which is down over 8 percent on 2016. So, if the FTSE is able to take the lead here as the safe haven, this should be the first spot where trading begins to turnaround into the positive.
On Monday, trading began to show signs of improvement in the FTSE. There was movement into the green here, and although the index did spend most of the day below the opening price, the fact that gains were made at some points is very encouraging news. At the time of writing this, the FTSE was still down, but only about 21 points, or 0.37 percent. Movement at the time was headed upward, with just over an hour left in the London trading day. Overall, it was a choppy day, but the fact that there were signs of life is good. At its best, the market was up over 40 points, or close to 0.80 percent in the positive.
It is also worth noting that certain components of the index performed much better than others. Johnson Mathey, a company that has a diverse number of businesses ranging from financial to chemical, to several things in between, is performing well, perhaps because of a diversification of risk. This is an important takeaway from the market decline that we are going through.
This is not direct proof that the U.S. markets will find traction. But it is a positive sign in this direction, even if it does take several days for this confidence to take hold. European markets do have an impact upon the markets in the United States, as we have seen time and time again. This happened when Greece’s economy crashed, when Russia’s ruble crashed, and countless other times. Ignoring the impact that one economy has on another is a sure sign that you will be a losing trader, regardless of which market you are in. Even short term binary options traders need to pay attention to worldwide news events if they wish to gain an edge over the competition.
Of course, you do need to take into account that the FTSE is currently right around its three-year low, so there may be extra support in this marketplace than what we are seeing elsewhere. But with everything that is going on in the world right now, with oil crashing below a 12-year low, with every other negative influence out there, an arbitrary number like this doesn’t seem like it would post any sort of last support levels. Still, this is a possibility, and the influence that mass trader psychology does have cannot be emphasized enough. When panic sets in, markets act funny and in unexpected ways. This can be detrimental if you don’t pay attention and adjust for it.