For several years, the Dow Jones (DIA) Industrial Average, S&P 500 (SPY), and Nasdaq (QQQ) have all been riding on the back of the bull. However, that changed in the beginning of this year as the Chinese market crashed, sending waves through the global marketplace. Nonetheless, a couple of weeks ago, it seemed as though we were going to start seeing a recovery. However, I don’t think that the recovery will last. The reality is that US Indices are likely headed further down. Much of my opinion on this has to do with both the US economy and the global economy. Today, we’ll talk about why I believe that US indices are headed downward and how binary options traders can take advantage of the trends.
Why US Indices Are Spiraling Downward
When it comes to market wide declines, like the one I’m predicting today, there’s never a singular cause for the drop. In fact, there are generally several reasons that we can expect the declines. This case is no different. Here’s why I believe that the Dow, S&P, and Nasdaq all have quite a bit further to fall…
Oil – Oil is a big driver for any market. After all, oil is the key indicator for the energy sector. The reality is that when oil’s value is low, the energy sector makes an incredibly lower amount of profits. This leads to massive declines in stock values in the energy sector any weighs heavy on the market as a whole.
US Economy – While the United States economy was thought to be doing well just six months ago, signs are showing that things aren’t quite as they seemed. Unfortunately, the US economy is doing incredibly poorly. Today, PMI data was released showing a contraction. On top of that, we’ve seen declines in US jobs, and in the month of January, US home sales fell by more than 9%.
Global Economy – Another big issue for the US market is the global economy. The reality is that most publicly traded companies in the United States rely on their ability to do business outside of the US in order to bring revenue in. Unfortunately, when global economic conditions are poor, companies in the US have a hard time doing business outside of the United States, causing lack-luster revenue, poor earnings, and ultimately declines in the market.
Valuations – While we’ve seen several declines in the value of United States stocks throughout the beginning of the year, stock valuations are still far higher than they should be. This causes natural resistance in the market, making what is already bad worse.
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