Meir Velenski’s 2019 market predictions – Guest Editorial
“I actually expect much bigger moves in 2019 as nervousness grows and more funds move money from markets into cash or bonds for security and safety” says Meir Velenski
Meir Velenski CEO of Velenski Financial Group is a market expert on FX and CFD trading and a consultant to firms in this market. Here, he looks at how he sees the retail FX market as the new year begins
Moving South Globally
With the US markets moving an average of 2-3% each session this has now become the norm and is a classic characteristic of a bear market .
The main issue here is that when a bull market comes to an end, it is the reluctance of the committed bulls and the private investor to sell and that they will only see the market as Blue and moving up . Big mistake.
China, the big world savior of the last 2008 crisis by buying everything in sight is not in the same position now as then and is in a recession. No other global player is here to rescue the world economy and the Chinese stock market is only down 50%!
What does this mean? Well, after over 10 years of rising global markets mainly due to massive QE from Central banks , and China buying all commodities in sight, this has now come to an end.
In addition, this type of Central Bank activity – intervention is now redundant and Central Banks are at a loss how to stimulate economies in the event of a downturn.
It is clear that many companies especially the Internet Darlings are seeing their share price being hammered.
Private trader – what is the dynamic?
The private trader who actually can only react normally goes long on markets via traditional share purchase or via CFD and Spreadbet firms, and the private investor sees any downturn as a opportunity to buy. This is correct in a Bull Market but a big mistake in a Bear Market .
Most private traders don’t have the expertise, experience or nerves to go short (sell now and buy cheaper later on to cover the position) . Little knowledge and little support helps the CFD firms reap in the profits from client losses, which is something that has become a regulatory moot point in recent years.
This is where ESMA rules are there to protect the private investor, by limiting the size of the margin or leverage that a private trader is permitted. So Prior to ESMA rules, a private trader could leverage their money at say 100 or 200 to one. Now it’s about 25-30 to one within European markets.
Downwards and big moves
I don’t think its really a good thing to be misled by markets bouncing upwards as sometimes happens in a Bear Market, which sucks in the trader thinking the markets are rebounding. This is a serious error. Markets that Bounce on no news or not enough news are a weak bounce and should be viewed as a selling opportunity.
I actually expect much bigger moves in 2019 as nervousness grows and more funds move money from markets into cash or bonds for security and safety .
The biggest player and mover in the first quarter, especially from where I am sitting, will likely be the British pound pre and post Brexit. One thing for certain is that post Brexit the GBP will be very volatile but will get much stronger post Brexit.
The British pound has been hammered and is due a significant move. This is because intrinsically, the value is just sentiment and concerns have oversold the GBP. In a Bear Stock Market there would perhaps be a move to the Japanese Yen, Swiss Franc and the US dollar.
In summary I would not be surprised if there was as much as a 30% move downwards in global stock markets in 2019 and those traders who are not selling short or don’t know how to should speak to their CFD providers soon as possible.
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