The future seems a little brighter, market sentiment gets more positive – Market Analysis – June 12

The future seems a little brighter, market sentiment gets more positive – Market Analysis – June 12

Tremendous central bank interventions seem to have worked for now, the market sentiment gets more optimistic

Despite the sizeable bearish movement we witnessed yesterday in the stock markets that brought to mind the worst moments of the crisis, investors are again showing confidence in the economic recovery, and purchases reappear in the stock markets.

Yesterday's strong bearish momentum was initially motivated by fear of a second wave of the pandemic due to the evolution of data in some North American states, at least the explanation given by some media.

But in reality, it is no more than a healthy corrective move after the continued increases indexes have experienced in recent weeks.

There is no doubt that the uncertainties about the evolution of the pandemic and the economy are still maintained, as stated by the President of the Federal Reserve.

Still, the measures already taken by the central banks and their determination to do more, if necessary, will maintain the markets' stability, and we will gradually see their volatility decrease.

The economic figures and the actions of both monetary and political authorities will set the course for the markets soon.

From a technical perspective, we can better observe the technical nature of this movement.

US Equities

USA30 has stopped the fall precisely at the level of 100-day SMA at 25060 and has rebounded today more than 2%.


The same has happened with USA500- the support level has been the 200-day SMA around 3000 points from where it has returned to the upside with gains of about 2%.


Nothing has changed fundamentally or geopolitically from yesterday to today, all the elements that could concern investors yesterday are still valid today, so the price action has a purely technical character that was undoubtedly necessary for decongesting the mostly overbought markets.

In the European indices, the movement has been similar. In the case of Spain35, the correction has stopped at the previous resistance level, now support located around 7170 points.


Bullish market trends

From these levels, the index has rebounded. A typical pull-back corrective move to the levels from where the current bullish move was triggered.

The markets are therefore still bullish, and the strength of this trend will depend in no small extent on the economic data that we get to know, especially data on employment in the United States and those related to domestic demand: retail sales, consumer spending ...etc.

In Europe, the main market-mover will be the result of the European Commission's decision regarding the approval of the "next generation" rescue fund. The adoption of this measure would suppose enormous support to the European stock markets, particularly the Spanish and Italian ones.

In this scenario of greater stability of the markets and gradual recovery of the economy, the US Dollar should continue its downward path that began a few weeks ago, given its historically low level of interest rates.


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