US GDP contraction to have limited impact on global economy; market may dip below Apr 7 low: Jai Bala
Jai Bala
, Chief Market Technician,
Cashthechaos.com
, suggests markets might dip below the April 7th low. A bottom is possible if the Dow Jones crosses 40,661.
US GDP contraction
will likely have a limited global impact. Markets are seeking
alternative growth sources
. European and
Asian markets
are showing strong performance. The overall market impact should be manageable if things remain stable.
How do you see this contraction of US GDP? It has contracted by 0.3% in the first quarter?
Jai Bala:
Yes, what is more relevant is the markets are not a function of the GDP and so markets are quite smart to look past the numbers and they may have seen such a move and that is the reason why we have seen such a hard knock for the markets in March and April. So, this is probably in the price.
But having said that, when it comes to how the markets are reacting and how the price structure is positioned as of today, we could have one more low below the April 7th low for the markets but that is not a surety. If the
Dow Jones Industrial Average
was to take out 40,661 on an intraday basis, we already have a bottom on April 7.
Do you see any impact of US GDP contraction on the
global economy
?
Jai Bala:
Yes, there will be limited impact and the markets are probably looking for alternate growth engines in the world and that is the reason why we are seeing outperformance in some of the European and Asian markets. I guess if things do not get too out of hand, this probably will have a limited impact on the market.
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