Despite the Fed’s dovish comments, global markets are continuing to fall. Fed The DAX 30 is gaining traction as it attempts to break out of its triangular formation. The FTSE 100 is in danger of slipping below 7,000 points as it tests critical support. As dropping commodity prices and damaged sentiment take hold of the market, it’s been a bit of a rollercoaster week for equities thus far. With earnings season approaching, investors are undoubtedly asking how long stock values will maintain their current levels, given that they are based on high multiples that will become unsustainable as wages rise. Persistently high inflation is also a concern, as central banks around the world relax their views on what the upper bound should be.
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The Hang Seng, which is down more than 3% and is on its eighth day of losses in the last nine trading sessions, led the Asian day with heavy losses. Given how US equities were once again at all-time highs yesterday after the Federal Reserve confirmed its bearish tone, saying that conditions of substantial further progress toward its full employment and price stability goals had not been met to warrant scaling back its monthly asset purchases, the moves so far appear to be a corrective pullback. The European stock market is a sea of red this morning, with all major indices down over 1.2 percent at the time of writing, with the Italian FTSE Mib suffering the greatest hit, down roughly 2.2 percent so far. The majority of the majors have erased their gains from yesterday, and it appears that specific risks are being examined, with negative economic data, rising costs, and a comeback in Covid cases at the forefront. A widespread reduction in bond yields is keeping indices at record highs, but after months of extraordinary valuations, many investors may be thinking it’s time for a change of course, and the question is if now is the right time. 4-hour chart of the DAX 30 The DAX 30 is gaining pace as it approaches the conclusion of its triangle formation, as forecast, but the direction remains uncertain. For the third session in a row, the German index has broken below its trendline support, indicating weakness in the lower bound and implying a strong move lower in the coming days. To confirm a bearish breakout, I’d wait for a breach below 15,420. Alternatively, the index has challenged the triangle’s upper bound, so a break over 15,725 might signal more bullish momentum on the way to the all-time high of 15,806. Daily Chart of the FTSE 100 Since breaking the 7,000 mark in April, the FTSE 100 has never really been able to settle above it, and the UK index could be likely to fall below it once more. The recent bullish bias has begun to wane, and the FTSE 100 has been stabilizing in a horizontal range for the past few weeks. So far, support at 7,042 has held up nicely, but with a stronger bearish bias, this level might be invalidated in the next days, making the 7,000 mark the next crucial region to watch. Alternatively, a break over 7,200 might signal a return to bullish momentum. Learn more about the fundamentals of the stock market here, or download one of our free trading guides. —- Market Analyst Daniela Sabin Hathorn contributed to this article. Daniela’s Twitter handle is @HathornSabin./n
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