The plunge in Dow futures during the Asian trading session on Tuesday added an extra layer of volatility to the market action, according to Richard Coppleson at Bell Potter Securities.
Coppleson, author of the must-read daily note “The Coppo Report“, said Dow futures “carried on like a drunk trying to get into a nightclub”, adding they were “totally erratic and all over the shop” and just “dragged [markets] around wherever they went all day”.
The veteran trader said that while there was panic by mainly retail investors, big funds will now be starting to think about bargains.
“Unlike yesterday when many held their nerve – today, with Asian markets crumbling & Dow futures trading down heavily – some just ran for the hills – probably though more retail punters, as instos were looking for bargains given this drop was anticipated (we knew it was coming – but just didn’t know exactly when),” Coppleson said.
He said the “economic environment / earnings situations are still very good globally and that this was “a valuation / sentiment / reality check correction that was necessary & needed to just wipe the slate clean & exit all the weak holders who were driving stocks up without any understanding of risk” (emphasis Coppleson’s).
With everyone looking to the US markets for the next cue, barring a complete bloodbath on Wall Street, Coppleson said: “Watch the banks tomorrow – if we get another US selloff then market will bottom in the first 30 minutes tomorrow then go higher.”