March 15, 2022 9:06:03

One step forward, two steps back it seems. The fog of war, questionable ceasefire talks plus plunging Chinese stocks means more whipsaw price action this week. While oil is back to flat on the month after gains of 38%(!), the euro is still trading below 1.10. Equity markets are similarly not faring so well, with the China-US tensions and Covid-19 rearing its head in Asia again.

US stock markets failed to cling to opening gains yesterday. The market appears fairly sanguine about peace talks. We should also not forget that US stocks have sharply outperformed the rest of the world. But notably, tech stocks suffered yesterday as bond yields rose. The Nasdaq is now officially in bear market territory. That means it is now more than 20% below the all-time high in November.

S&P500 turns heavy and aims for recent lows

The benchmark US stock market has followed the two other major US indices and is now also painting a technical “death cross” on the charts. This is where the short-term 50-day SMA crosses below its long-term 200-day SMA. It indicates the potential for more downside and a major sell-off.

This pattern has proven to be a reliable predictor of some of the most severe bear markets including 1929, 1974 and 2008. Historically, the pattern precedes a prolonged downturn for both SMAs. But the timing of any selloff can be tricky to forecast. Once recent instance was in the summer of 2016 which proved to be a false indicator.

Prices recently tried to consolidate above the January spike low at 4222. But the Fib level at 4281 capped any gains. Bears look to have regained the initiative and now have the recent low at 4114 in their sights. The 100-week SMA sits at 3945 as next support. Only a move back above 4281/99 towards 4383/4400 will stop the bearish momentum.