Market Outlook Q1
2019 ended up being an amazing year for stock bulls, but the question many investors are asking themselves now is: Is it time to book profits or will the rally continue in 2020? There are plenty of risks that could slow the rally down or even trigger a correction. Some of the major themes are:
However, sentiment remains bullish, and should Washington DC and Beijing agree on signing off Phase One of the trade deal, it would at least reduce the risk of a full-blown trade war.
The S&P 500 is marching towards a new record high. The German DAX30 has been lagging behind its US counterparts recently, but might soon catch up and reach the current record high at 13,596 points as sentiment is improving. Key support is seen at 13,283 points, followed by the major area of support between 13,081 and 13,100 points.
Gold has seen increased volatility in the recent weeks, mostly due to geopolitical tensions in the Middle East. Given that the instability in the Middle East is likely to persist for some time, and other uncertainties such as the Brexit process and the on-going trade talks between the US and China keeping traders on their toes, should keep demand for the precious metal intact in Q1.
The charts suggest that the uptrend remains intact, although the Daily RSI is still showing slightly overbought conditions. Strong support can be expected ahead of the 21 DMA – around $1520.
Meanwhile, Gold bulls will be looking for a clear break above the $1600 level to confirm that the rally has not run out of steam yet. With plenty of risks still present in the market, and the rally in equities starting to look somewhat stretched, an extension of the rally beyond $1600 may occur in Q1 of 2020.
Oil traders were seeing whipsawed price action following the recent clash between the US and Iran. Prices for WTI jumped to $65, only to fall back below $59 at today´s open. The market sees the risk of an escalation of the Iran crisis as low, as both countries want to avoid a war. Furthermore, recent data from the US Energy Information Administration (EIA) agency showed a surprising increase in US oil inventories.
Further position covering from Oil bulls might lead to an extension of losses, but solid support is seen at the 200 DMA around $57.70. A clear break below that level could signal that the short-term downtrend is not over, and potentially pave the way for a test of the $55 support level.
Meanwhile, the risk of further conflicts in the Middle East remains relatively high, and traders should be prepared for sudden spikes in volatility.
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Soaring US yields trigger the wrecking ball effect as yields become a source of volatility for risk, rather than a source of support