Stocks: No end in sight for bear trend
Fawad Razaqzada May 16, 2022 4:22 PM
List of negative forces weighing on investor sentiment grows larger
There’s a plethora of negative forces weighing on investor sentiment right now. Inflation. Weakening growth in China. Europe heading for recession. Rising interest rates. Quantitative tightening. Cryptocurrency in turmoil. As a result, the markets have been unable to stage a sustainable rally and explains why there’s been no real follow-through after the rally at the back end of last week. Investors have been quick to take profit and not keen to carry positions in case the markets continue to head lower. In other words, we are in a bear market and rallies get faded into, while support levels break more often than not. News continues to disappoint, so it is difficult to see an end to this.
DJIA testing key resistance
The Dow like many other global indices has been printing lower lows and lower highs, which means the sellers have been in control of price action. It is now testing the broken support zone from late February and early March around 32,200 and 32,350 area. Once support, is this zone going to turn into resistance going forward? I wouldn’t be against it, judging by what has happened in the past with similar such levels.
Looking ahead to rest of the weekWe have already seen Chinese retail sales and industrial production disappoint expectations overnight. The recent lockdowns in China means economic activity was always going to suffer, as we have found out. However, the numbers were even weaker than expected, which is why we are seeing renewed weakness in risk assets. Investor worries about a Chinese slowdown is real.
Globally, consumers are feeling the pinch with surging inflation. We will get a picture of how bad things really are at the world’s biggest economy, the US on Tuesday with the release of the latest retail sales report.
In the UK, meanwhile, inflation has climbed to a whopping 7.0% year-over-year in March, but there is hope that price pressures will come back down as the economy slows and due to base effects. Still, concerns over stagflation are likely to keep the pound and UK stocks under pressure for a while longer. UK CPI on Wednesday will be among the week’s macro highlights.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.