S&P500: sales continue
The forecast for week August 24 - August 28
During the week trading will be determined by two key factors. Firstly, this is a trend in global equity markets. Financial instability in China has contributed to the flight of investors from "risky assets" to safe assets, which specifically refers to the gold. Sales at the world's leading stock markets are very strong and in this context, at the beginning of the week we should expect demand for "safe assets". The index of "fear" VIX is approaching the level of 31.0, signaling a possible correction in the equity markets. Secondly, a disrepancy has occurred between gold and inflation expectations, which will also be played out this week. Because of instability in the stock markets, the precious metal has deviated from its basic factor - inflation. "Black gold" is now at a fresh six-year Low and growth of oil production in the OPEC countries, the US and Russia will only help sales. The yield of US 10-years' Treasuries, which reflects inflation expectations since early August, fell by 12 basis points, whereas gold for the same period has added weight by 5.4%. Against this background, we can open Sell position on growth of quotations to 1173/1190 and take profit around 1144.
XPT/USD and XPD/USD:
During this week we expect dominance of bearish sentiment. First, slowdown in economic growth of China as a whole and the automotive industry in particular will play a strong negative factor for both metals. China, along with the US and Japan, is one of three players in the global auto industry. Over the last 7 months, production of cars in China fell by 33.6%. It gives the basic auto industry demand for platinum group metals and, in this regard, we have got the factor which will put pressure on stock. Secondly, the CRB Commodity Index at the end of last week lost 2.2% (14.2% since the beginning of the third quarter), indicating strong bearish sentiment on the part of financial institutions. Against this background, in the middle of the week we should open Sell position with XPT/USD on growth of quotations to 1030/1050 and take profits around 995 and Sell positions with XPD/USD on growth of quotations to 613/631 and take profits around 591.
In the first half of the week we expect continuation of the downward trend. On the global equity markets we now witness panic - sales completely swept all the continents. Investors massively close long positions and go into "safe" assets. Last week S&P500 finished below the psychological level of 2000 points. And now support area becomes zone of 10% correction from the historic high (1923.6 p.). Traditionally, financial institutions use 10% correction for opening long positions. On Thursday, August 27 the second estimate of GDP for the 2nd quarter will be released. Most macroeconomic indicators say about growth that can support demand for corporate papers and stop wave of sales on time. Against this background, during this week we should open Sell position on growth of quotations to 1980/2001 and take profit around 1930 .
Alexander GoryachevAnalyst of «FreshForex» company
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