Market analysis

The US Stock Market Overview

This week the US Stock Market witnessed the largest decline since the 18th June 2021.

The decline was witnessed on all major US stock-based Indices such as the S&P500, DowJones and NASDAQ. The S&P500 originally fell by 1.71% which is a significant decline amongst stock-based indices, however the price corrected with the opening of the US Session and ended the day with a decline of 0.88%. It was triggered after the stock market reached a new price high; the NASDAQ has increased by 15.55% so far this year before retracing, the DowJones by 13.65% and the S&P500 by 16.17%.

The stock market has been performing particularly well this year after a large increase in investor risk appetite. However, the market did originally react negatively to the new price high reached amongst the main Indices this week, sparking fears that certain assets may be overpriced. Traders today will be cautiously monitoring the market to ensure the bearish movement stabilizes and does not build momentum.

The price action of the three main indices were largely based on both technical and fundamental aspects of the market. On the technical side, the price declined after a rejection was formed on the charts when the market failed to buy the “peak” but instead decided to cash in profiting trades and hold back, eventually causing the retracement to form. The price currently has not corrected 100% and still remains lower than the previous swing lows. Therefore, we still have the possibility of forming a bearish Elliot Wave Formation via lower swing lows and lower swing highs. Bears in the market will be looking to see if the price declines once more to form a new “swing low” or continues to correct back upwards.

On the other hand, the fundamental picture still remains vital amongst our analysis.

Firstly, the US bond yields sharply fell to below 1.25%, much lower than the yearly high of 1.78%. The decline in the 10 Year Bond Yields was triggered by concerns regarding economic growth, lack of effectiveness of the currently used vaccines as well as increase in Covid-19 cases.

Second, the US Jobless Claims released yesterday indicated an increase in the number of citizens requiring unemployment benefits, possibly the reason why we had seen the latest unemployment rate increase to 5.9%.

In addition to concerns regarding the regional economy, there are also concerns regarding the largest foreign investors in US stocks. Stocks are priced according to supply and demand; the demand is largely also driven by foreign investments, the third largest foreign investor currently being Japan. This week, the Japanese Prime Minister announced a state of emergency until late August, even with the approaching of the Olympic games. This has further fueled cautions as investors look to ensure the activity abroad does not affect regional assets.

Lastly, we are again approaching the quarterly earnings season where US based companies will release their financial figures such as their Revenue, Sales, predictions for the next quarter and their Earnings per share. A Company’s quarterly earnings are likely to increase price volatility as investors use the information to determine whether to invest or hold back. The increase in activity creates the volatility which is also experienced amongst indices.

The price of the SNP500 continues to attempt to correct upwards this morning after yesterday’s decline, currently trading at $4,332.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.


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