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March 23, 2022

Is The Global Stock Market Too Bullish Right Now?

Frank Cabibi

Global stock market investors may have gotten way ahead of themselves after the recent moves that were made by major countries' monetary policies. Right now, markets around the world are broadly down after several days of gains.

Treasuries Surge

10-year US treasuries have reach a new high for the first time in three years at 2.4%, and the yield is currently sitting at 2.33%. This is likely due to the Federal Reserve's tighter monetary policy after a 25 bp hike in interest rates. Powell's remarks regarding inflation suggests that we will expect a more hawkish Fed which could lead to higher USD/bonds, lower stock market prices. And this is true for other countries like England, New Zealand and the Euro-area eventually.

Global Stock Market Setups

SPX500

global stock market

SPX500 is down nearly 1% on the day after concerns resurface about the Fed's hawkish stance towards the dollar. This could just be a natural pullback in the market rally where the index could find support around $4421. So, price could fall another 1% from the current price if it can't catch a rebound before then.

UK100

global stock market

UK stocks are coming off the highs as well for some kind of retracement. Below, the index can find support around the 200 DMA as well as the the 50% and 61.8% fib levels. That would be a 5% and 6.25% drop respectively from the current price.

DEU40

global stock market

German stocks actually look the weakest here on the 1D timeframe after a rally from the lows in the 12,400s. Price is nearing resistance in the 14,800s which is also coupled with the 50 DMA and 61.8% fib level retracement. It is a much less liquid market so spreads are not as tight, and big moves could show up as gaps on the chart.

Overall, investors need to watch their leverage and risk as always, because this is when that method comes in handy.

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