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When will the Market Fall Next?

Jun 27, 2022

Sentiment: Bearish

Type of Trade: High Growth

Industry: Market Index

This last couple days recover came few days later than we have anticipated and investors should not get too excited just yet. While the markets are currently trading in bearish mode, including S&P/ASX 200 (trading on the bearish side of SMA250 (pink line) and bearish side of SMA40 (red line), our job is to detect trend and opportunities to profit out of a very shabby market conditions via BBOZ, BBUS, GGUS and GEAR.

The key driver of this downside in the market is the tread of interest rates rise higher than anticipated which was in fact confirmed this month and the most likely, the inevitable recession outcome. Nevertheless it is important to take a look at other key dates that can softly drive investors sentiment in the US stock market during next few weeks.

  • Tuesday 28/06 – Consumer confidence index report
  • Thursday 30/05 – PCE inflation (monthly and YoY) report
  • Friday 01/07 – S%P Global manufacturing PMI and ISM manufacturing index
  • Monday 12/06 – Fed 1 year inflation expectation report.
  • Tuesday 14/06 – Producer price index final demand

S&P500

S&P500 is currently trading in bearish mode, meaning multiple higher lows and lower lows. We have detected in the last three months that the market start falling a week prior the FED meeting which indicates extremely high levels of volatility (VIX).

VIX Volatility Index

Volatility Index is currently trending in slow motion to the upside, suggesting a continuation of increase volatility. The chart below shows multiple higher highs and higher lows, which is directly opposite to the market. As we continue to monitor both indicators the chart below shows that we are probably a week from the next downturn in the markets.

S&P/ASX 200

The Australian Market once tipped to be immune to US market fall is taking similar decline, and has recently breakout the hypothetical support. Despite RBA decisions, the market is now moving on the back of US sell off. Hence, we are tipping that our market will have a short term recover until Friday of 8th and volatility should start coming back to the market once again. It is likely that S&P/ASX 200 could then find another lower low during the week of the next FED meeting if US sell off is confirmed once again.

(ASX: GGUS) when to cease our Position?

We are planning to take profit at the SMA40 levels indicated as per the chart below. Our next move will be to short the US or Australian markets via ETF, nevertheless we will make the decision based on market sentiment at the time.