Equity markets reacted strongly lower with many investors fearing this incident could result in a flaring of tensions and an escalation of conflict on a larger scale. The jury is still out on that but it certainly introduces another new unknown and if it is one thing that markets hate, it is unknowns.
The old trading adage, "Sell first and ask questions later" was on display in full force in today's session.
Safe havens were in vogue as the Yen moved sharply higher and US bonds put on more than a full point with the Ten Year yield sinking to 2.475%. That is the lowest it has been at in six weeks.
I must say I am a bit disappointed in the gold price as the metal could not even stay above the $1320 level. With the backdrop of an Israeli ground operation against Hamas, and with this commercial airliner incident, one would think it would have garnered some more upside. Tomorrow is going to be an important day for the metal therefore. At least the HUI was very strong, a positive sign.
Take a look at the Russell 2000, again, a very good barometer of risk appetite among investors/traders.
The index closed below its 50 day moving average for the first time since early June.
The two particular indicators I have chosen to display are both in bearish modes as well confirming the move lower.
In looking at the chart I get the sense of a market trading in a broad range. It lacks the necessary momentum to get through the double top ( TOP of the RANGE) near 1220 but so far it has had enough buying to hold its support at the bottom of the range near 1080. Based on the chart pattern, and especially if events globally continue to unnerve investors for the short term, odds would seem to favor a move back down towards that support level once again.
The Russell could chop around in a range for some time. It does not have to necessarily either fall out of bed and collapse lower nor does it have to go rip roaring higher. Trading range markets can trip up a lot of traders as they tend to get bearish as price moves to the bottom of the range and bullish as it moves to the top. However, unless we get a clear breakout from either side of the range, odds favor a continuation of the consolidation pattern.
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