Market Sell-Off Was “Overreaction,” Says Avatrade

Market Sell-Off Was “Overreaction,” Says Avatrade

Yesterday, the US market saw its worse sell-off in two years due to fears that emerged about the Coronavirus spreading. However, Avatrade have stated that traders should not be too concerned about these numbers.

Although Avatrade has been somewhat pessimistic about the role of the Coronavirus and what it might do the global economy in the past, they changed their tune when discussing the huge market downturn in the US market yesterday. In what was a massive hit on the market, the Dow Jones dropped 1000 points or 3.56%, the S&P500 fell 3.3.5%, and the NASDAQ was the worst hit with the index dropping by close to 3.71%.

However, this was perceived by a member of the Avatrade team as simply “market participants overreacting” to the news that the virus has spread and that while this market turndown was expected, it should not have dropped by such a significant figure. Instead, they explained that they did “not see any significant reason as to why the Dow Jones should plunge over 1000 points, as there is nothing new about the on-going virus. The fact is, that the way investors were acting yesterday made the situation look like a pandemic” in one of their latest blog posts.

In fact, on the contrary, the platform has asked whether it could be a market opportunity for those looking to counteract the sell-off and benefit from it. Although, it might not be as clear cut as this and they have drawn attention to a few important market signifiers that could better explain whether for investors it is indeed an opportunity and if so, which areas of the market they should have a look at investing into. The two areas of which to look into in order to answer this is volatility index and gold.

This two “risk-off” instruments saw impressive jumps yesterday while the rest of the US market saw its drop. The VIX saw a 46% increase means that it crossed above the 25 mark for the first time since nearly 14 months ago. Meanwhile, European equity volatility also surged with Euro Stoxx 50 seeing an increase by as much as 47% irrespective of the current volatile European market that has looked in dire straits over the last couple of weeks.

As per Avatrade, “the fact is, nothing significant occurred yesterday which caused both of these indices to surge the way that they did”. They note that only when the VIX index hit the 35-mark, last seen in December and February 2018, and this is considered to be a “fear number” and that it reached this 25 mark back in August but then quickly recovered. Gold, on the other hand, saw no strong price action and the closing price was essentially the same as it began. While, today, “we are not seeing any upward move. I think it is likely for the gold price to retrace a little or consolidate before the upward momentum takes off again.”

All of this combined means that it does indeed look like investors overreacted yesterday and that there is no need to be concerned about the situation just yet. This also means that in regard to whether there is an opportunity to invest the answer is not yet. With the platform stating, S&P500 index crosses back above the 50-day moving average on a daily time frame, then this could be the opportunity that investors have been waiting for. However, if the price fails to cross above the 50-day SMA, then it is likely for the price to touch the 100-day SMA.”

Therefore, keep your eye on the market and ear to the ground, for now, at least.

Ready to join our tribe?

We respect your email privacy

Subscribe now to recieve exclusive updates and offers!

Recently Similar News

Latest Guides

Latest News

ChangeNOW,Cryptocurrency,Investment

ChangeNOW Launches The NOW Tracker App

The young, but fast-growing online cryptocurrency exchange, ChangeNOW, has just announced the release of its latest product. The NOW Tracker is a free asset management app that lets users keep track of their coins and tokens across different wallets. Available on Google Play and the App Store, NOW Tracker is flexible and functional. This solution […]

9 September, 2021
eToro,Investment,Trading

eToro Becomes An Official Partner Of RB Leipzig

The world’s leading social investment network, eToro, has recently announced a new and exciting partnership. According to an announcement on eToro’s Twitter page, the company has become the latest partner of the German football team, RB Leipzig. A two-year partnership agreement has been signed between the parties. Running until 2023, this agreement can be extended […]

24 August, 2021
Binance,Bitcoin,token

PSG’s Messi To Receive Part Of His Salary In Cryptocurrency

The Argentinian footballer, Lionel Messi, has made headline news several times in the past few weeks. Following his surprise departure from FC Barcelona, the player confirmed that he will be joining Paris Saint-Germain FC. The move was significantly newsworthy but got even more interest when it was announced that part of the footballer’s salary will […]

23 August, 2021
Blockchain,Casino,Ethereum

KingTiger Casino Announces Shut Down

KingTiger Casino has announced that it has ceased all operations until further notice. According to its website, the casino has had to “temporarily close” due to Ethereum network congestion. It is not yet clear if and when this online Bitcoin casino will reopen. Registered players can still access their wallet and withdraw their funds. A […]

12 August, 2021
Binance,Casino,Cryptocurrency

CryptoCasino Announces Temporary Close

CryptoCasino has stopped operating until further notice. According to a landing page on their website, the casino is undergoing an update. There is no information about when the casino will reopen or the reason why an update required the website to shut down temporarily. Players who hold a crypto wallet account with CryptoCasino need not […]

11 August, 2021
Binance,Bitcoin,SEPA

Binance Suspends SEPA Inward Payments Until Further Notice

Binance Suspends SEPA Inward Payments Until Further Notice Binance has just announced that it has temporarily stopped all incoming SEPA payments. As a result, users will no longer be able to deposit euros using the primary European payments network. The world’s largest cryptocurrency exchange did not provide any specific information regarding the reason behind this […]

12 July, 2021
Bitcoin,Cryptocurrency,Investment

Why are Crypto Holders Worried of Declaring Their Ownership?

Cryptocurrencies have been popularly regarded as the future of finance globally. Investing in virtual coins has become a lot easier than it was a few years ago with the evolving crypto industry. Over the last few years, Bitcoin has caused a lot of buzz in the market. It has established itself as the de facto […]

8 July, 2021
Bitcoin,CoinMarketCap,Trading

Bitcoin On The Rebound Following Elon Musk’s Latest Announcement

The price of the world’s largest cryptocurrency is rising again following the latest comments from Elon Musk. Bitcoin’s price has climbed and stayed above $40,000 on Monday 14th June, following an announcement by Musk that Tesla will, once again, start accepting BTC payments. The latest comments have proven once more what a powerful influence the […]

16 June, 2021