The Reasons Why It’s Hard to Call The Markets Right Now

Justin Freeman

If the first quarter events have left you wondering if we’re in a bull or bear market and about what to do next, don’t worry; you’re not alone. In fact, two top analysts from two of the biggest banks in the world have released conflicting statements on which way the markets might be heading.

Reasons Why It’s Hard to Call The Markets

Bull vs Bear

Bloomberg reports that Morgan Stanley’s Chief U.S. Equity Strategist, Michael Wilson, and JPMorgan strategists led by Mislav Matejka have taken opposite views on the current state of the markets.

Wilson’s take is that the surge in the value of risk-on assets, which has taken place since 15th March is a ‘bear market rally’. That means the +17% rise in the value of the Nasdaq 100, for example, is a momentary burst of buying activity that forms a natural, if short-lived, moment in a longer-term downward trend.

“The bear market rally is over … That leaves us more constructive on bonds than stocks over the near term as growth concerns take center stage – hence our doubling down on a defensive bias.”

Source: Bloomberg

Bearish Technical Analysis

From a technical analysis perspective, the recent rally may be running out of legs. Trade volumes have declined during the bull run, suggesting that the bulls haven’t yet come across real selling pressure from the bears. This would make sense as the price lows of mid-March touched long-term price support levels at areas of the charts where speculative shorts aren’t usually put on.

With the Nasdaq 100 now back in the region of the 100 SMA on the Daily Price Chart, there could be more incentive to lighten up on risk, especially considering the disappointing data out of the US regarding manufacturing production levels in March.

NASDAQ 100 Index – Daily Price Chart – Q1 2022 – Bearish Appraisal

NASDAQ 100 Index - Daily Price Chart 050422

Source: IG

Bullish Technical Analysis

The alternative view is also hard to bet against. The trading rooms of the world are peppered with traders who lost out by betting against stock market rallies once again forming, even if all the data pointed to price heading downwards.

The breakout of the downward price channel might have been based on relatively low trading volumes, but the path of least resistance still appears to be upward. This sentiment is matched by the JPMorgan analysts who stated:

“We do not see equities fundamental risk-reward to be as bearish as it is currently fashionable to portray.”

Source: Bloomberg

NASDAQ 100 Index – Daily Price Chart – Q1 2022 – Bullish Appraisal

NASDAQ 100 Index - Daily Price Chart – Q1 2022 – Bullish Appraisal 050422

Source: IG

Using a longer time frame, it’s possible to see the bounce in mid-March was launched from the 100 SMA on the Weekly Price Chart. The two other times that price clipped that key metric marked the start of multi-month bull runs.

NASDAQ 100 Index – Weekly Price Chart – 2015 – 2022 – 100 SMA Support

NASDAQ 100 Index - Weekly Price Chart – 2015 - 2022 050422

Source: IG

Final Thoughts

With professional analysts struggling to reach a consensus, it could be a time for trading in small size or remembering that some of the best trading involves not trading but instead waiting for a clearer signal.

Crowdsourcing information about scam brokers can help others avoid falling into the traps set by disreputable brokers, and you can share your experiences here. If you would like to know more about this particular topic or have been scammed by a fraudulent broker, you can also contact us at [email protected]


Justin Freeman

Latest news

Forex vs Crypto: What’s Better For Beginner Traders?
The crypto and forex markets are two of the world’s most popular among investors and traders. Read more
Three Great Technical Analysis Tools for Forex Trading
You don’t have to be very technical minded to make use of technical analysis in your forex trading. Read more

Safest Forex Brokers 2024

Broker Info Best In Customer Satisfaction Score
#1 73% of retail CFD accounts lose money. Founded: 2014 Global Forex & CFD Broker
Number One Broker
Best Trading Conditions Visit broker
4.9
#2 Blackbull LogoYour capital is at risk Founded: 2014 Global Forex Broker
Number One Broker
BEST SPREADS Visit broker
4.8
#3 AvaTrade LogoYour capital is at risk Founded: 2006 Globally regulated broker
Number One Broker
BEST CUSTOMER SUPPORT Visit broker
4.9
#4 plus500 logo81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Founded: 2008 Global CFD Provider
Number One Broker
Best Trading App Visit broker
5
#5 Between 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
#6 Forex Broker eToro Logo76% of CFD traders lose money Founded: 2007 Global CFD & FX Broker
Number One Broker
ALL-INCLUSIVE TRADING PLATFORM Visit broker
4.9
#7 XM LogoYour capital is at risk Founded: 2009, 2015 and 2017 Global Forex Broker
Number One Broker
Low minimum deposit Visit broker
5
#8 FxPro LogoYour capital is at risk Founded: 2006 CFD and Cryptocurrency Broker
Number One Broker
CFD and Cryptocurrency Visit broker

    Forex Fraud Certified Brokers

    AvaTrade logo
    FxPro logo
    XM Logo
    plus500 logo
    FXTM Logo
    eToro Logo
    BlackBull Logo Small
    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.