Slumping equity markets have something in common with the Terminator movie franchise on Friday, as the machines are against us.
Technical indicators that guide computer-driven trading are uniformly negative in the wake of Thursday's sharp sell-off in equities.
While fundamental investors often dismiss technical analysis as a form of voodoo, there is no denying its importance in setting trends. Charts such as moving averages are critical guides for what's known as program or algorithmic trading, which account for an increasing amount of trading activity.
After Thursday's session, which saw the S&P 500's slump enter correction territory, TD Waterhouse said in a report that "all three major U.S. stock indices closed below their 200-day moving averages, as did Canada's S&P/TSX, Europe's Stoxx 600 and Japan's Nikkei 225 - which likely triggered a lot of program selling in trading algorithms."
There's a negative trend everywhere you care to look. TD Waterhouse noted that all 30 Dow stocks were down more than 1 per cent, and all but eight of the S&P 500 companies declined. In Europe, ground zero for this sell off, only 30 of 600 stocks rose in the Stoxx 600 index.