From The Dealing Desk – Will the Markets Correct?

Lately we are hearing that global markets are high and that we need a correction. This is something we should not ignore for a few reasons:

• US Federal reserve bank could raise rates again and also unwind more Quantitative easing
• North Korea seems to ignore sanctions warnings and keeps firing missiles
• Historically September and October are not  good months for markets

The trend in most major markets, especially the markets that have a good amount of listed commodity shares, is up. This is due to the commodity rally we are in at the moment. How long will this last? This depends on the demand for the commodities and the supply from these big mining companies.

A way to deal with the rising risk of a correction is to close some of, or a portion of, your positions. Especially the ones that are overbought. Another way is to hedge your risk by shorting some index futures like the Alsi.

 

STXRESI: Satrix Resources ETF

This is the chart of the STXRESI on a weekly basis. This instrument does look overbought in the short term but as you can see has been much higher in the past.

Next time

I will look at a few commodity shares and explore the current trends of the share prices.