Selling of risk resumes but pace likely to slowdown

After Monday’s big falls , investors were relieved to see green first thing this morning as the vicious selling took a breather. However, the positivity didn’t last too long and the selling resumed once Wall Street opened for trading. Safe-haven gold also rebounded. Yet, the risk off tone was nothing like Monday, well not yet anyway. Thus it remains a possibility that the markets could still end in the green by the conclusion of today’s session, and gold lower. However at the time of writing there were no signs of this happening.

But a pause or a slowdown in selling of risky assets looks likely, at least for two reasons. First, because of short-side profit taking, and second, due to the impact or expected impact of so-called bargain hunting. There is also the possibility of central bank action to stem the selling. Slightly longer term though, it is still difficult to say given the risk of the coronavirus spreading to other major economic regions remains a worrying possibility. Beyond the immediate impact of the virus, there are concerns that it could take a long time for confidence to return to normal once the outbreak dies down. Still, I can’t help but feel the markets may have overreacted. So a short term respite is what I am anticipating.

Source: MT4

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