Equities Attempting Recovery Following Heavy Monday Losses

Global equities benchmarks have seen a mixed start to the week with most indices finding their feet today after heavy selling across Monday’s trading. The ongoing rise in USD on the back of last week’s FOMC meeting has had a heavy downward impact on equities prices. With the Fed acknowledging that elevated inflation is here to stay for longer than first thought, the market has done away with any near-term idea of a Fed-pivot. Instead, hawkish expectations have become entrenched with many players now suggesting .75% hikes will be the new .25% hikes as the Fed battles inflation.

With a slew of central banks having hiked rates in recent weeks, global bond yields have been on the rise, adding further pressure to equities markets. Recessionary fears have taken centre stage in recent weeks. Price action in GBP over the last two trading days highlights the level of nerves in the market currently. While equities prices are stabilising a little today, amidst a softer start for the US Dollar, downside risks remain key. Powell speaks later today and his comments have the potential to turn equities lower again if the Fed chair is seen adding further details to his concern over the inflation outlook. The latest US consumer confidence report due today is also likely to add to bearish sentiment for equities traders while traders will also be watching the latest durable goods number

Technical Views

DAX

The breakdown below the 12462.59 level, marking new lows for the year, is a significant development for the market. While below this level, and with MACD and RSI bearish, the focus is on a further push lower towards the 11590.13 level next. Back above, and 13067.45 is the first resistance for bulls.

S&P 500

The breakdown below the 3910.00 level in the S&P has seen the index plunging back towards the yearly lows around 3647.00. While bulls can defend this level, there is potential for a rebound. However, price action remains a heavy and a break down towards new lows and next support at 3534.75 is the big risk.

FTSE

The sell of fin the FTSE has seen the market hurtling down towards the 6994.2 level. Price briefly pierced below the level before trading back above and, while this support holds, a rebound to 7213.9 is viable. Should we break lower, however, in line with bearish MACD and RSI, the 6827.3 level and bear channel lows, is the next support area to watch.

NIKKEI

The sell-off in the Nikkei has seen the market breaking through the 27422.9 level and trading down o test the rising trend line from year to date lows and the 26246 level support. While this level is holding for now, bearish MACD and RSI suggest risks of a further move towards 25500.5 next.