US & European markets 2-3% lower, Greek PM resigns, ASX futures down 67 points

Well, it hasn't been a good August for equity investors anywhere. I'm not quite sure whether the Greek Prime Minister's resignation and snap election is a negative for European markets (it'll ultimately help that government pull back to the centre from the left and do business with the rest of Europe with less anxiety), but it certainly added fuel to the fire for markets last night and as you can see from today's first chart, US S&P 500 futures busted through the bottom of their range that had been in place since February this year. Do not underestimate the importance of this key level - as markets looked as though they were going to defeat the buying support that existed between about 2,040 and 2,080, stops will have been triggered at that point and selling intensified into the close.

ASX 200 futures (second chart) are sitting on their year-to-date lows and they're trading 8% lower for the month of August. The press has been quick to point to threats to global growth from a lack of contributions from emerging markets and while there is no doubt that sentiment in many areas of the world could be much better, I suspect that the velocity of last night's drop was more to do with the triggering of key levels and the interconnectedness of markets rather than a split-second decision for big money to express a negative macro view of the world throughout a single session.

It's not fun when markets do this, but this is what we put up with for superior returns to risk-free assets like bonds and cashs. For perspective, I have included a chart of the ASX 200 since pre-GFC times and you can see that there have been many moves similar to this month's as the market has slowly chopped its way higher. As direct investors you have the luxury of being able to step out of the market if it is causing you discomfort and re-entering during times of less uncertainty. For now, aside from a softer than expected earnings season, corporate Australia remains in pretty good health, so just ensure you understand the stocks you own and why you own them as prices bounce around.

I will note that, for those inclined to trade in alternative ways, the Rivkin Global model portfolio has outperformed the ASX 200's index futures by 6.68% throughout the month of August. For those seeking ways to gain exposure to market falls as well as rises and possibly add a blend of this type of trading to their traditional long-only portfolios, please contact us at customerservice@rivkin.com.au and we can send you more information. 


Source: Rivkin, Saxo Bank

To view the Rivkin economic calendar and Global Markets matrix, members can click here.

This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

Complex product warning

This article contains information about foreign exchange contracts, which are considered complex financial products. Please click here to read ASIC's foreign exchange trading article before considering an investment in foreign exchange contracts. 

This article contains information about CFDs, which are considered complex financial products. Please click here to read ASIC's "Thinking of trading contracts for difference?" document before considering an investment in CFDs.
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