Jump to content

Are equities likely to continue their summer rally?


Recommended Posts

What is next for equities following July’s market rally?

 

Daniela Sabin Hathorn | Presenter and Analyst, London | Publication date: Tuesday 02 August 2022 

What's next for equities?

After July’s market rally many investors are likely wondering what is next for equities?

Historically, when markets are trapped in a bear market there are often rallies that make investors feel like it’s the right time to buy, before being trapped once again in a selloff.

If we look at both charts of US indices and European indices we see the same technical pattern - a sustained break above a key area of resistance. As mentioned, this is not uncommon to see and usually precedes another downturn.

But the performance in July has been quite something, with most indices managing to achieve a follow-through to the initial reversal. This has likely left many investors feeling like it’s the right time to buy again, but is that the case?

Well, in other instances when market sentiment has taken such a sharp turn during a bear market, it has usually involved central banks cutting rates and loosening monetary conditions. This hasn’t happened yet, and will likely not happen for a while, but markets seem to be very convinced central banks will start cutting soon and are therefore trying to front run the market. This is likely going to be a costly mistake if it turns out to be another rally within a bear market.

The belief that inflation has been handled and the key focus of central banks is aiding economic health has likely been the cause of many of those who think the lows in June were the bottom of the market.

But the Federal Reserve (Fed) has in fact reiterated that bringing price stability is more important than avoiding a recession in the US, a key takeaway that seems to have been overlooked.

We have also seen the central bank abandoning forward guidance and focusing on incoming data to make its policy decision, meaning there is likely more volatility up ahead for equities.

We’re also seeing companies cutting their growth forecasts and warning about staff cuts, which will in turn lead to a weaker third quarter (Q3), something investors don’t seem to be considering.

Technical outlook: S&P 500 and the DAX 40

The technical outlook for both the S&P 500 and the DAX 40 is still showing the longer-term trend to be bearish.

Despite having broken above key resistance at their respective descending trendlines, the momentum over the last two sessions is showing buyers are struggling to find further upside in the short-term. This means that both the S&P 500 and the DAX 40 could start to return to their longer-term bearish trend over the next few days.

 

 

IG Group.PNG

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • ETN Elliott Wave Analysis Trading Lounge Daily Chart, Eaton Corp PLC,  (ETN) Daily Chart ETN Elliott Wave Technical Analysis FUNCTION: Trend MODE: Impulsive STRUCTURE: Motive POSITION: Minute {v}   DIRECTION: Upside in wave {v}.   DETAILS: As we have had a clear three wave move into wave {iv} just shy of 0.618 {iv} vs. {ii}, we are finding support on top on MG1 which suggests further upside could come.     ETN Elliott Wave Analysis Trading Lounge 4H Chart, Eaton Corp PLC, (ETN) 4H Chart ETN Elliott Wave Technical Analysis FUNCTION: Trend MODE: Impulsive STRUCTURE: Motive POSITION: Wave (i) of {v}.   DIRECTION: Upside in wave {v}. DETAILS: Looking for a top in wave (i) of {v}, volume seems to suggests the low could be in place as we can see a spike in volume. Looking for a break and support on top of 320$ to then take off higher.   Welcome to our latest Elliott Wave analysis for Eaton Corp PLC (ETN). This analysis provides an in-depth look at ETN's price movements using the Elliott Wave Theory, helping traders identify potential opportunities based on current trends and market structure. We will cover insights from both the daily and 4-hour charts to offer a comprehensive perspective on ETN's market behavior.   * ETN Elliott Wave Technical Analysis – Daily Chart* The daily chart shows a clear three-wave move into wave {iv}, which ended just shy of the 0.618 retracement level of wave {ii}. Support is found on top of MG1, suggesting further upside potential in wave {v}. Traders should monitor the support level for confirmation of continued upward movement. 4H Chart* The 4-hour chart indicates a possible top in wave (i) of {v}, with volume spikes suggesting that a low could be in place. A break and support above $320 would provide further confirmation of the upward trend, setting the stage for a move higher in wave {v}. Technical Analyst : Alessio Barretta Source : Tradinglounge.com get trial here!  
    • S&P BSE Sensex (India) Elliott Wave Analysis - Day Chart Trend Analysis: Function: Trend Mode: Impulsive Structure: Navy blue wave 3 Current Position: Gray wave 5 Direction for Next Higher Degrees: Continuation of navy blue wave 3 Detailed Analysis: The S&P BSE Sensex (India) day chart, analyzed using Elliott Wave Theory, indicates a trending market. Currently, the market is in an impulsive mode, signifying strong directional price movements rather than corrective or sideways movements. The primary structure under observation is the navy blue wave 3, part of an impulsive wave sequence. This phase is characterized by significant upward momentum, indicating a strong bullish trend. The market is presently in gray wave 5, typically the final wave in an impulsive sequence, suggesting an impending completion before a potential corrective phase. Looking at the next higher degrees, the analysis projects the continuation of navy blue wave 3. This continuation indicates that even after the completion of gray wave 5, the broader bullish trend symbolized by navy blue wave 3 is expected to persist. The detailed analysis notes that navy blue wave 2 of 5 appears complete, indicating that the market has concluded a corrective phase and is now entering the next impulsive phase, labeled as navy blue wave 3. This phase is anticipated to demonstrate strong upward price movements, furthering the overall bullish trend. A critical component of this analysis is the wave cancellation invalid level, set at 69732.12. This level serves as a key threshold; if the market falls below this point, the current wave analysis would be invalidated, necessitating a reassessment of the wave structure. Summary: The day chart analysis of the S&P BSE Sensex indicates the market is in an impulsive phase, specifically within navy blue wave 3, following the completion of navy blue wave 2 of 5. The ongoing momentum in navy blue wave 3 suggests continued bullish activity. The critical wave cancel invalid level is set at 69732.12, essential for validating the current wave analysis.   S&P BSE Sensex (India) Elliott Wave Analysis - Weekly Chart Trend Analysis: Function: Trend Mode: Impulsive Structure: Navy blue wave 3 Current Position: Gray wave 5 Direction for Next Higher Degrees: Continuation of navy blue wave 3 Detailed Analysis: The weekly chart of the S&P BSE Sensex (India), analyzed using Elliott Wave Theory, provides a comprehensive view of the market trends. The current market function is identified as a trend, indicating that the prevailing market direction is expected to persist. The wave is characterized as impulsive, signifying strong and directional price movements, as opposed to corrective or sideways movements. The key wave structure under analysis is the navy blue wave 3, part of a larger impulsive sequence. This suggests the market is experiencing significant upward momentum. The current position within this sequence is gray wave 5, typically marking the final stage of an impulsive wave sequence before a potential corrective phase. Looking at the next higher degrees, the analysis continues to point towards navy blue wave 3, indicating that even after the completion of gray wave 5, the overall bullish trend represented by navy blue wave 3 is expected to continue. This implies ongoing bullish momentum in the market. The detailed analysis indicates that navy blue wave 2 of 5 has likely concluded. This completion suggests the market has ended a corrective phase and is now entering the next impulsive phase, designated as navy blue wave 3. This phase is characterized by strong upward price movements, reinforcing the overall bullish trend observed in the market. A critical component of this analysis is the wave cancellation invalid level, set at 69732.12. This level acts as a key threshold; if the market price falls below this point, the current wave analysis would be invalidated, requiring a reassessment of the wave structure. Summary: The weekly chart analysis of the S&P BSE Sensex indicates that the market is in an impulsive phase, specifically within navy blue wave 3, following the completion of navy blue wave 2 of 5. The continuation of navy blue wave 3 suggests sustained bullish momentum. The wave cancel invalid level is 69732.12, which is crucial for confirming the validity of the current wave analysis.   Technical Analyst : Malik Awais Source : Tradinglounge.com get trial here!  
    • USDCHF Day Chart Elliott Wave Analysis USDCHF Elliott Wave Technical Analysis Function: Counter Trend Mode: Corrective Position: Navy blue wave 2 Structure: Gray wave 1 Next Lower Degrees: Navy blue wave 3 The USDCHF Elliott Wave Analysis on the daily chart offers a detailed examination of market behavior through Elliott Wave Theory. The current movement is identified as a counter trend, suggesting a corrective phase rather than a continuation of the dominant trend. The mode of this wave is corrective, indicating the market is adjusting previous impulsive moves. Currently, the analysis focuses on navy blue wave 2, implying a significant correction after the initial impulsive wave, marked as gray wave 1. As the market approaches the end of the navy blue wave 2 correction, the analysis points towards a transition into navy blue wave 3. This wave typically involves strong and directional price movements, indicating a significant market shift. The ongoing navy blue wave 2 is forming a flat correction, a pattern characterized by sideways movement, suggesting indecision and a temporary balance between buyers and sellers. This phase is nearing its end, setting the stage for the next impulsive phase. An important aspect of this analysis is the wave cancel invalid level at 0.92250. If the market moves below this point, the current wave analysis would be invalidated, requiring a reassessment of the wave structure. Summary: The USDCHF day chart indicates a corrective phase, labeled as navy blue wave 2, following the impulsive gray wave 1. The next anticipated move is the transition into navy blue wave 3, an impulsive phase. The critical level for validating the current wave analysis is set at 0.92250.   USDCHF 4-Hour Chart Elliott Wave Analysis USDCHF Elliott Wave Technical Analysis Function: Counter Trend Mode: Corrective Position: Orange wave C Structure: Navy blue wave 2 Next Lower Degrees: Navy blue wave 3 The USDCHF Elliott Wave Analysis on the 4-hour chart provides insight into market behavior using Elliott Wave Theory. The current market movement is classified as a counter trend, indicating a corrective phase rather than a continuation of the primary trend. The current mode is corrective, showing the market is adjusting prior impulsive moves. The specific wave under analysis is orange wave C, part of a corrective sequence following the completion of orange wave B. This suggests the market has finished a corrective wave B and is now in the final leg of the correction with wave C. The broader structure includes navy blue wave 2, typically a corrective wave following an initial impulsive wave 1, indicating the market is undergoing a significant correction after completing the first impulsive wave of a larger cycle. The analysis points towards the next lower degrees, indicating the direction is towards navy blue wave 3. After the current corrective phase (navy blue wave 2) concludes, the market is expected to enter an impulsive phase identified as navy blue wave 3, often characterized by strong and directional price movements. The current phase, orange wave C of 2, indicates the market is in the final stages of this correction before potentially resuming the main trend. An essential aspect of this analysis is the wave cancellation invalid level at 0.92250. If the market falls below this point, the current wave analysis would be invalidated, requiring a reevaluation of the wave structure. Summary: The USDCHF 4-hour chart analysis indicates the market is in a corrective phase, labeled as orange wave C within navy blue wave 2. The next expected movement is a transition into navy blue wave 3, marking an impulsive phase. The critical level for validating the current wave analysis is set at 0.92250.   Technical Analyst : Malik Awais Source : Tradinglounge.com get trial here!  
×
×
  • Create New...
us