Quiet Markets – But What Are They Telling You? 26/11/20

Nigel Frith
People sitting around a table with a large amount of food

The Thanksgiving holiday is here. Given the pivotal role the US economy plays in the world’s financial markets, it can be expected that traders across the globe will take their foot off the gas for a couple of days.

How to Trade Safely During the Holiday

Safer trading involves trading the market as it is rather than how you would like it to be. That is particularly important in 2020 with months of roller-coaster activity coming to an abrupt halt.

There will be some who look to scalp trade the rudderless markets of Thursday and Friday. Momentum traders are likely to have to wait a couple of days for signs of the next break-out trade.

As Business leaders from Wall Street, West Coast private equity houses and Main Street USA start their four-day break, there will be many around the world deciding to join them and sit on their hands. Idle hands and boredom trades can be a sure-fire way to lose money.

Clues from Events Earlier in the Week

The inactivity after a whirlwind November also provides an opportunity for traders and investors to reassess their positions and strategies. A scan of market moves from earlier in the week offers some clues as what to expect on Monday.

When Will the Rotation into Value Stocks End?

The big story of the last two weeks has been a rotation from growth stocks to value ones. That is best exemplified by a surge in demand for pharma and hygiene names such as Pfizer (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ). At the same time, the Nasdaq fell 7% on the news of a COVID Vaccine being confirmed.

The vaccine inspired shift away from COVID-friendly tech stocks showed signs of slowing on Wednesday. In the opening hour, of the last ‘shopping day’ for US equity traders before the holiday, a reversal took place.

Tech is Back!

The opening hour of trading on any exchange is usually the most interesting; Wall Street on Wednesday didn’t disappoint.

Amazon, one of the winners from the pandemic rose almost 2% in the first hour of the session. That move also involved breaking through a significant resistance level at $3135 which had been suppressing the stock for more than a week.

Not only was there a big green hourly price candle, but there was also an uptick in volume. That hour of trading saw volumes put through at levels not seen since mid-November.

Johnson and Johnson price chart with highlighted candles and arrows

Source: IG

Compare that price move to that of Johnson & Johnson. In the same hour, the hygiene firm saw its hourly candle turn red. The volume traded also fell off.

Is J&J performing more in line with expectations in the run-up to Thanksgiving? Is it disinterest or signs of a more significant rotational shift, out of value and into growth?

Amazon Stock price chart with highlighted section and arrows

Source: IG

It might be early next week before confirmation of that is given. Any moves in Asia and Europe on Thursday and Friday could very possibly be false signals. It wouldn’t be the first time those markets started a movement which was reversed when the big players in the US step back into the market after a break.

Nigel Frith

Latest news

Three Great Technical Analysis Tools for Forex Trading
You don’t have to be very technical minded to make use of technical analysis in your forex trading. Read more
What Does Binance Being Kicked Out of Belgium Mean for Crypto Prices?
Belgium regulator FSMA orders crypto platform Binance to immediately cease its operations. Read more

Safest Forex Brokers 2024

Broker Info Best In Customer Satisfaction Score
#1 73% of retail CFD accounts lose money. Founded: 2014 Global Forex & CFD Broker
Number One Broker
Best Trading Conditions Visit broker
#2 Blackbull LogoYour capital is at risk Founded: 2014 Global Forex Broker
Number One Broker
BEST SPREADS Visit broker
#3 AvaTrade LogoYour capital is at risk Founded: 2006 Globally regulated broker
Number One Broker
#4 plus500 logo81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Founded: 2008 Global CFD Provider
Number One Broker
Best Trading App Visit broker
#5 Between 74-89 % of retail investor accounts lose money when trading CFDs Founded: 2010 Global Forex Broker
Number One Broker
Low minimum deposit Visit broker
#6 Forex Broker eToro Logo76% of CFD traders lose money Founded: 2007 Global CFD & FX Broker
Number One Broker
#7 XM LogoYour capital is at risk Founded: 2009, 2015 and 2017 Global Forex Broker
Number One Broker
Low minimum deposit Visit broker
#8 FxPro LogoYour capital is at risk Founded: 2006 CFD and Cryptocurrency Broker
Number One Broker
CFD and Cryptocurrency Visit broker

    Forex Fraud Certified Brokers

    FXTM Logo
    eToro Logo
    BlackBull Logo Small
    AvaTrade logo
    plus500 logo
    FxPro logo
    XM Logo
    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.