ZFX: Short covering? A sharp rebound normally not a bullish sign
Stocks in Asia-Pacific were generally good in earlier trading session, following Wall Street’s rally. The three major Wall Street indexes rebounded from the recent low, of which the Nasdaq rose 2.7%, the Dow rose nearly 440 points.
Most of the analysis believe that investors move the funds back to those tech stocks at the low levels, triggering the rebound amid the lack of bullish news. ZFX analyst Jacob Leung said that, there was not much fundamental supporting. In the markets overnight, negative news was even more obvious.
Traders are closely watching the trend of the greenback, which can spark the volatility of global equities. A slip of the dollar is normally suggesting an improvement in risk appetite. On Wednesday, the dollar fell against all major currencies and commodities. Gold price reached a high around $1950 despite the recovery of risk appetite.
Even though there is rising concern over the trade deal between Britain and the EU, the pound bounced back from 1.2883, a six-week low, to 1.3 level on Wednesday. Now, the market is expecting they may fail to reach any deal.
Also, there is uncertainty over the development of the coronavirus vaccine. The final clinical trials for a COVID-19 vaccine, developed by AstraZeneca and Oxford University, have been paused as one of the participants suffered dangerous side effect.
The US Congress still has no progress on the new economic stimulus package. The Republicans are proposing a $500 billion package, while the Democrats reiterated that they will not agree with this if the relief bill amount is less than $2.2 trillion.
ZFX analyst Jacob Leung said that we should be cautious that the move in financial market on Wednesday was not really in line with the fundamentals. It should be also noted that from the past experiences over the market adjustment, a sharp rebound, no matter whether it is driven by fundamental or technical issues, is normally not the sign of the end of the whole downtrend.
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