Black Monday: Was that it?

The Day So Far

Thankfully, a much quieter day so far following yesterday’s extraordinary action. I have never seen a day quite like it, beginning with the Shanghai Composite completely routed to the tune of 8.46% and then S&P hitting 1870 (limit down pre-cash open) before roaring all the way back to hit 1950 and then closing at 1868 again. Amidst the carnage, Apple, for so long the darling of this bull market, opened down over 10% and below the crucial $100 handle and then retraced to close above the $100 support after the company’s CEO wrote a letter to CNBC’s influential market commentator Jim Cramer to calm fears over Apple’s prospects in China. Elsewhere, commodities continued to come under pressure, with crude briefly falling below $38, whilst the euro hit its highest level in 8 months against the dollar.

The Afternoon View

Many traders will be wearily staring at the charts this morning, reflecting on the events of what is being dubbed ‘Black Monday’ by many in the media, and will be wondering “was that it?”. Was that the big correction we were all looking for? Well, the strong bounce from the lows suggests that there are plenty of bulls ready to buy this not-inconsiderable dip and we would expect that the counter-rally can continue today as investors sniff out bargains from these oversold levels. We are long equities and short t notes, looking for a reversal of some of the action yesterday. First big data of the week, US consumer confidence at 15:00 BST. These markets are in desperate need of some good news so expect markets to rally if this is a solid number. I think at this stage that ‘good news is good news’ particularly given the skittishness of market participants and the ongoing worries regarding the lack of growth globally.