SURPRISE!

The main indexes have been strengthening in Europe yesterday after the big surprise by ECB. Unexpectedly the central bank cut its key interest rate and moves to buy bonds and asset-backed securities from October. The ECB shocked the markets by announcing the interest rate cut and indicating that its own QE program is set to begin next month. European benchmark indices were traded massively higher on the news, but gains finally have been more modest.

FTSE +0,06% - DAX +1,02% - CAC40 +1,65% - MIB +2,82% - IBEX +1,96% 

 

In US the optimism from Europe sent indexes to new intraday highs, but later indices dipped into the red territory. At the beginning of the session S&P 500 and DJIA touched intraday record levels. Finally, they plunged and closed all US indices in red.

DJIA – 0,05% - Nasdaq -0,22% - S&P -0,15% - Russell -0,43%

Seems now the US markets are just tired after a great four weeks rally and the S&P 500 closed below 2,000 and closed its third day decline in a row. This is not a surprise since DJIA, S&P and Nasdaq gained in the last month more than 4%, and Mr. Market needs some days of consolidation. That is the reason behind the pullback and modest losses. In a closer technical look of DJIA, we found a huge reversal head&shoulder pattern, which might mean for the future a target price of 17,800 for the Dow, if the neckline is taken. When is going to happen? Nobody knows only the Crystal Ball owners.

The BFM Assets Team.