Is This a Dip to Buy or the Start of a Market Correction?

Justin Freeman

Stock Graph over a map of the world

The surprising change in tone by the US Federal Reserve last Wednesday has been followed by a very slow-motion, minor market correction. On Thursday, the Forex Fraud analysts picked out that statements from the US central bank could “change the landscape” for investors, and it looks like after extended deliberation, some doubt has crept into investor sentiment.

Most of the questions at this stage relate to the timing of the move. A reaction to the FOMC stating that interest rates would rise sooner than expected would be naturally followed by a shift away from risk assets. But why did it take days to filter through into price action, and what does it say about whether the loss of confidence is momentary or more serious than that?

sp500 chart showing major dips in price 210621

Source: IG

S&P 500 – A car crash, or just a minor case of travel sickness?

In its statement presented on Wednesday, the US Fed raised its expectations for inflation and brought forward the timeline for interest rate hikes. The threat to equities was real and apparent, but price fell away a minor amount and then rebounded. By the close of European markets at 5 pm Friday, the S&P 500 index was back within touching distance of the key 4232 resistance/support level.

It wasn’t until the final hours of the last trading session of the week that price corrected. The run into the Wall Street close was associated with broad selling. That then spooked Asian markets, which posted some alarming headline falls in the opening session of the following week.

  • Japan’s Nikkei 225 index plunged 4% intra-day Monday
  • Hong Kong’s Hang Seng index – down 1.34%
  • USDJPY broke the 110 support-level and trading sub 109.90 at the end of Asian trading

usdjpy chart showing high rise before dipping 210621

Source: IG

Will the markets bounce from here?

A much-trodden path for the markets and risk appetite is for US traders to hit the panic button and cause a sell-off in Asia, but by the time Wall Street opens again, investors are likely to adopt a more bullish stance. The scenario can’t be dismissed, and the US open will be eagerly awaited today.

  • Those talked about interest rate rises are still months and years away. The Fed’s statement brought rate rises forward from 2024 to 2023.
  • The monthly price chart for the S&P is still holding its long-term supporting trend-line.

A 5-10% correction in equities can’t be discounted, but the markets have for 14 months pretty much gone up in a straight line. Until the supporting line breaks, then the path of least resistance appears to be upwards. It will break at some point, but is the suggestion of interest rate moves in two rather than three years going to be the catalyst for a major sell-off?

us500 cash chart showing consistent rise 210621

Source: IG

The delayed reaction to the Fed’s news could give the bulls some hope. For the die-hards and those with nowhere else to put their cash, the minor adjustment in the markets is just a shake-down of the less committed traders.

If you want to know more about this topic or have been scammed by a fraudulent broker, please contact us at [email protected]


Justin Freeman

Latest news

Scammer Alert – This is One Broker to Definitely Avoid
The run into the year-end is often a time for increased price volatility and new trading opportunities, but some bad news comes with that. Read more
Could Earnings Season Surprises be Just Around the Corner?
The quarterly process of US corporations announcing their most recent earnings reports has for some time been a procession of ‘beats’. Read more

Safest Forest Brokers 2020

Broker Info Best In Customer Satisfaction Score
#1 ForexTime LogoYour capital is at risk Founded: 2011 Global CFD & FX Broker
Number One Broker
BEST FOREX BROKER Visit broker
5
#2 BlackBull Markets LogoYour capital is at risk Founded: 2014 Global Forex Broker
Number One Broker
BEST SPREADS Visit broker
4.8
#3 Your capital is at risk Founded: 2014 Global Forex & CFD Broker
Number One Broker
Best Trading Conditions Visit broker
4.9
#4 Forex Broker eToro Logo67% of CFD traders lose Founded: 2006 Global CFD & FX Broker
Number One Broker
ALL-INCLUSIVE TRADING PLATFORM Visit broker
4.9
#5 Forex Broker Pepperstone LogoBetween 74-89 % of retail investor accounts lose money when trading CFDs Founded: 2010 Global Forex Broker
Number One Broker
Low minimum deposit Visit broker
4.9

    Forex Fraud Certified Brokers

    Pepperstone Logo
    FXTM Logo
    skilling logo
    OctaFX Logo
    BlackBull Markets Logo
    Exness Small Logo
    ATFX Logo
    LegacyFX Small Logo
    City Index Logo
    Plus500 Small Logo
    IC Markets Logo
    investous logo
    XM Logo
    IQ Option Logo
    HYCM Logo
    Forex.com Logo
    AvaTrade logo
    Vantage FX logo