Heavy selling

Dominic Picarda

It has been a great run for equities and the Euro in recent weeks. Is it really over, though? Yesterday’s powerful selling in DAX, FTSE and the single currency was much more dramatic than anything we’ve seen since the uncertain days of early November. And, risky assets are certainly ripe for a pullback, given quite how overbought they had become. From that perspective, a retreat is healthy at this point. Even if we got a correction in equities of 5% or more, I do not think it would be terminal. In fact, I think it would prove to be a good opportunity to buy anew.

I currently see the markets as in a sort of no-man’s land. They have not quite entered short-term downtrends in most cases, but could very soon do so. I know better than to try and call big turns. Instead, I will await developments. If the markets quickly and strongly recover, I will seek further long positions. Renewed selling will turn me into a temporary bear.

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