By eToro

Dead cat bounce or full blown turnaround?

China yet again plummeted overnight after as fears of a global economic slowdown hit markets for a second day. Monday is being called the “Great Fall of China” after stocks fell 8.5%, now during Tuesday’s session stops in Shanghai have fallen 4% lower.

The reaction from the rest of the world will be interesting today to see whether the markets jump back higher and give us some kind of relief rally, or whether after the positive start that we predicted we start to see confidence unravel yet again.


The big question is whether this is the end of the lengthy bull market we have all been so used to over the last 7 years or this is now the turnaround that had been predicted. It would be wise to take stock before pulling out all assets from equities and adopting a fully risk off strategy. We must see how the U.S. has been affected by China, and the answer is economically not that badly. Remember this China story is not a new one and has been around for months.

Take care today with trading and remember that nothing is off the table when it comes to how far we could see markets move today. We could see another sell off, a rebound or somewhere in between, but remember just because we some kind of recovery doesn’t mean we are out of the woods.

What we do know from this morning is that European markets have started in positive fashion, with all of the major indices trading to the upside after thumping falls throughout yesterday’s session. It’s not a surprise to see a bit of recovery after heavy falls across the board but we now just need to gauge what kind of selling pressure is coming after today’s brief respite. This split time frame chart of the FTSE shows that yesterday’s moves have broken all kinds of downside technical levels.

We tried to gauge an overall trend on where it is in relation to the 200 period moving average, and on the FTSE now we are showing on all time frames that the UK is in a much more negative position on the back of the Chinese story.