Global macro overview for 07/02/2018:

The recovery of Monday's declines was not entirely convincing so far, but from the point of view of the stockholders, it is good that it was there at all, because during the day there was little indication of the implementation of the upward scenario. It seems that the sentiment on the market has changed quite significantly and that the long-awaited correction finally has a chance to materialize. For now, however, it is too early to prejudge anything.

The market began to speculate about what happened on Monday that the sell-off was so abrupt and deep. Some people are combining panic with the powerful forced demand for futures contracts on the VIX index from ETFs playing a drop in volatility. After yesterday's session, the holders of this type of products lost over 90% (!) Of invested capital in one day, losing a total of approximately USD 3.4 billion. This illustrates the scale of risk associated with the growing importance of ETFs on the New York Stock Exchange.

In turn, the American authorities said that nothing bad happened on the stock market - the stock market and the clearing system functioned correctly. "It was a normal correction, although it was big" - said US Treasury secretary Steven Mnuchin. Mr. Mnuchin soberly noted that since the presidential election, the stock market has grown by over 30%, so the correction should not be surprising.

Let's now take a look at the Dow Jones Index technical picture at the H4 time frame. The low at the level of 23,930 will now act as a technical support for the price. The market has managed to test the important technical resistance at the level of 24,893 as it bounces from the extremely oversold conditions. The next important resistance is seen at the level of 25, 240 and it might be hit if the momentum will keep rising up towards its fifty level.


The material has been provided by InstaForex Company -