Trading plan for 06/02/2018

The biggest sell-off in the SP500 index for six years has influenced the Asian session, and evidence of increased risk aversion can also be seen in the forex and commodity markets. The RBA kept the cash rate unchanged, but it was not without the dovish tone.

On Tuesday 6th of February, the event calendar is light in important economic releases, but the market participants should keep an eye on German Factory Orders data, US Trade Balance data and Canadian Ivey Purchasing Managers Index data.

SPY analysis for 06/02/2018:

The SP500 index slumped yesterday by 4.1%, and the February sell-off erases the increases from the previous three months. The sales frenzy reach the market in Asia, where the Japanese Nikkei 225 fell today by 4.7%, and the Chinese Shanghai Composite loses 3.2%. In an avalanche pace, investors leave their redeemed positions after an impressive rally in January.Risk aversion combined with the reduction of accumulated positions has classic implications. The volatility index of the American VIX exchange has doubled its quotations. Yields of 10-year Treasury bonds dropped from 2.85%. up to 2.65%.

Let's now take a look at the SPY (SP500 ETF) technical picture at the H4 time frame. The market has closed almost all the gaps that were left during the recent rally and so far bottomed at the level of 262.85. The market conditions are extremely oversold at this time frame and the momentum indicator is still pointing to the downside. Next technical support is seen at the level of 262.70.

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Market Snapshot: DJIA lost the most in recent history

The price of Dow Jones Index had been sold heavily yesterday as it went from 26,606 points to 23,930 points in two days.There is still a possibility of a further sell-off as both RSI and Stochastic oscillator did not reach the oversold levels yet. The next supports are seen at the levels of 23,615 and 23,240 points.

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Market Snapshot: DAX gaps down hard as well

The German DAX index has gaped down below the local trend line with a bottom at the level of 12, 241 and now is trying to bounce. During the way down it filled almost all gaps left during the rally. The nearest technical resistance is seen at the level of 12,500 and then at the level of 12, 600.

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