Buyers scramble to take advantage of value opportunity

After another strong market open, investors are starting to wonder what the recent sell-off was all about. Another day of strong buying looks likely as investors scramble to take advantage of what looks like a value opportunity before it closes down.

Concerns about a possible softening in China’s economic growth have been offset by news of a sharp upward adjustment in US 2nd quarter GDP. From a growth point of view, the US Fed looks well placed to begin increasing interest rates in December. This will heighten interest in comments Fed Vice Chairman Fischer is expected to make over the weekend about inflation and whether this might still be perceived as a barrier to rate hikes.

This morning’s rally has been helped by the large jump in oil prices, which has contributed to strong support for BHP. At the end of the day however, investors will also be conscious that short covering after a protracted down trend is likely to have turbo charged last night’s sharp gain in oil markets.

While the strong gains of recent days are encouraging, the residual concern for traders is that these type of moves are not unusual after the sort of large declines that preceded them. Major stock indices are yet to break back through resistance levels making it at least possible that the latest rallies will prove to be no more than corrections in an ongoing period of extreme uncertainty and volatility.

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