Stock markets have had the biggest rally in the past two years as endless amounts of cash from governments and central banks have kept them going. But, as central banks turned off the cash spigot and started raising interest rates, sentiment turned bearish early this month and stocks have fallen since then. The decline slowed for several months until the end of May, but last month selling resumed as major global economies appear to be heading into recession.
Yesterday and today stock markets opened with a lower bearish spread and continued to decline initially, but in the US session they made decent gains, especially European stocks. We decided to open a sell signal for shares in the German DAX30 index last Friday and are in profit after the 50 SMA (yellow) again rejected the price on the H4 chart.
DAX30 H4 Chart – The 50 SMA rejected price last Friday
Climb stalled at 20 SMA (grey)
The theme of today’s trading will likely be the anticipation of tomorrow’s US CPI (Consumer Price Index) inflation report. Barkin’s speech still hasn’t made headlines and is unlikely to be a market mover anyway. S&P 500 futures were down 30 points earlier, but have reduced that number to just 7 points as we prepare for the market open. Falling yields and oil prices pushed the lows up somewhat.
China’s new covid restrictions have also had a negative impact on risky assets such as crude oil and stock markets. US Oil WTI has fallen around $6 from above $103 to above $107 right now, after falling below this level some time ago. So it fell back earlier in the day after news that China is imposing more Covid-related restrictions. This is a short term problem, but the markets are more focused on inflation and earnings which should be disappointing. We therefore maintain our sell signal on the DAX, despite the last higher retracement.