May 14, 2022
  • May 14, 2022

Analysis of technical indicators over the previous two weeks

By on November 1, 2021 0

Mixed messages from technical indicators point to a potential change in market direction. Hourly and daily stock indicators remain positive for now, but forex and commodities signals have moved to “neutral” and “sell”. With major stock indexes posting all-time highs last week, there is an argument that there is little resistance to further upward movement for this asset class. However, disconnecting with other groups of assets is something to watch out for.

Technical indicators – What a difference a week makes

The week starting October 25 was marked by hourly and daily technical indicators offering an almost clean sweep of Strong Buy signals.

Technical indicators – October 25

Source: Forex Traders – Technical Analysis

The positive momentum from the previous week had allowed all of the asset groups in the above table to post rising weeks between October 18 and October 25.

It turned out that the “strong buy” signal was only good in the equity markets. As of November 1, the S&P 500 was up 1.43% and the FTSE 100 was posting a positive return of 0.46%. All other asset classes posted negative returns, with silver and oil down around 2% for the week. The euro and the pound both lost ground against the dollar.

Technical indicators – November 1

Source: Forex Traders – Technical Analysis

The nature of technical indicators and their reliance on past price data to predict future events may limit their effectiveness. The events of the past week show how looking in the rearview mirror doesn’t always help drivers who want to know which direction to take to go forward.

A breakdown between asset groups can, however, provide some interesting insight into the mood of the markets. The strength of the dollar represented by the fall in EURUSD and GBPUSD prices suggests a move towards the safety of the greenback. The rise in stock prices goes the other way, towards an increased appetite for risky stocks.

Final thoughts

A continuous, slow and steady rise in stock prices cannot be ruled out. This is, after all, the natural way of things in this market for many years. Price corrections are infrequent, dramatic, and entry points for short sales are difficult to identify in advance. This might be a good time for equity traders to sit down on their hands, with many deciding that it is too late to buy but too early to sell.

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