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March 7, 2022

Big Red Flag For Indices: What You Should Know

Frank Cabibi

Stocks sink on a global scale as the dollar strengthens due to conflicts on the Russian-Ukrainian border. Trae sanctions on Russia by the NATO allies is hurting economies around the world as another factor serves as a big red flag for indices.

Solidifying The Trend

Most indices are starting to show a more concrete direction to the downside as lower levels form and bounces from support are subtle. What we thought could have been a pullback initially is starting to form more of a trend on the S&P as well as in Britain, Germany and Japan.

Oil Supply Cutoff

Along with the sanctions in place, the US is having talks about cutting off Russian oil altogether to punish them for invading Ukraine. However, this move will have serious consequences on the stock market in the US because most of the oil production is outsourced from Russia and Iran. This has caused a choppier stock market as consumers will have to start spending more per gallon at the gas pump. And that triggers a domino effect of higher inflation of which is already at a 40-year high.

red flag for indices
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=wcrfpus2&f=w

'Red Flag For Indices' Chart Writeup

SPX500

red flag for indices

SPX takes another test around $4270s which suggests a potential break in support is more likely to happen. The big warning signal for indices is the recent break below support. A close below this level would probably take price to a lower low underneath the $4105 level. The 50 DMA's stark decline is quickly approaching the 200 and gearing for a potential death cross pattern on the 1D timeframe.

UK100

red flag for indices

The British stock market is registering similar behavior as the index touched under a triple bottom before rebounding some losses on the day. The market's recent dip under the 200 DMA last Friday is a big technical red flag for England's investors who are now 12% off the highs. The harsh sell off on the 1D timeframe is not even reflected by the 50 or 200 DMAs yet over 7% lower from March 3rd levels.

DE40

red flag for indices

The German market is the only index that turned positive today, up a little over 3% but still 23% from the highs. The index's break under the supportive trend line almost put stocks in a free fall for the past couple weeks. A death cross pattern did form which is Germany's big red flag going forward.

JPN225

red flag for indices

Japanese stocks dropped to a falling trend line after making a lower low on the day. A death cross pattern on this chart is also acting as a bearish signal for the stock market in Japan. Risk-off behavior is not just in America, but all over the world at this point. Support lies around 24,160s which were the highs of February 2020.

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