The Dow Market Movement

 

This Week Highlight - The Dow Market Movement
Following the sign-into law of the USD1.9 Trillion stimulus by President Biden, we would expect the Dow market to soar gain. Indeed, the market did make fresh new-high but a bit short-live in trend!

Suddenly, market traders are worrying of rising Bond yield that will put a lid on equity prices. Last Thursday wee hours in Asia, FED chair Powell reassured of keeping the interest rate near to zero through 2023 and led a jump in Dow again. Just one day before the weekend, policymakers said they have decided to end the capital ratio for the pandemic era in March. In simple words, all banks are to reduce their leverage in holding Treasury Bonds from the current capital reserve ratio. That means banks will be pushed to sell off some Bonds soon!

Hence, the selling of Bonds will trigger a rise in yields again. Dow plunged 234 points on Friday at market close. In our economic evaluation, U.S. is caught in a slow pace while inflation is rising due to excessive market liquidity. However, taking a look at the Bond yield curve will show you the flattening pattern that reflects a coming recession.

Moving into end-March and the beginning of Q2 seasons, we foresee the market will be highly volatile and filled with uncertainty. Traders are forewarned in managing their risk in taking up new positions. However, there is one market instrument that may be favorable again to global investors due to the mentality of seeking safe haven.

While we have identified the Dow benchmark to be supported at 32,000 level, the blue-chips in this equity basket might not be heading southward if Dow is well guarded above 32,000. Nevertheless, we may start to see interest returning to Gold prices as a hedge to equity risk. In short, the yellow metal has been trading in correction since last August and more than 6 months ion technical digestion. It's time to look into Gold again and plan your new entry for an expected and impending surge soon.



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