Market Analysis: MarketWatch Warns of Stock Market Trap

FXOpen

According to statistics since 1971, when the Nasdaq Index was created, the index price has been within the bullish trend approximately 75% of the days and 25% of the days within the bearish trend. But what’s interesting is that if you take the 100 largest bullish candles during this time, then 80% of them will occur during those periods when the market was in a bearish trend. A similar pattern can be observed for the S&P 500 index, which has a deeper history.

It turns out that the strongest one-day rallies occur during downturns — why is that so? The reasons may be:
→ emotions of market participants who strive to take long positions at the very beginning of the rally;
→ properties of bear markets, which are inherently more volatile than bull markets.

How does this relate to the current situation?

Of course, it is difficult to call the current market bearish. However, the MarketWatch article may be relevant due to the signals of weakness that the chart shows:

→ On Tuesday, there was a sharp rally against the backdrop of the release of favourable news about inflation. At the same time, the price moved away from the downward red correction channel, which was drawn within the current upward trend of 2023;
→ yesterday, as the chart shows, the index set the maximum of the year in the area of 15953 — but at the same time, the shape of the candle shows that the bears were active: since the candle closed at the lows with a long upper tail;
→ the price tested the median line of the ascending blue channel from bottom to top – it showed itself as resistance;
→ the RSI indicator entered the overbought zone for the first time since July.

The listed facts can be considered arguments to expect a correction in the index price after a noticeable increase from the lows set at the end of October.

Trade global index CFDs with zero commission and tight spreads. Open your FXOpen account now or learn more about trading index CFDs with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Indices

S&P 500 Analysis: Good News is Bad News Tech Stocks Back in Vogue as Nasdaq 100 Rallies to Record High The S&P 500 Index Has Reached a Significant Resistance Level France Joins European Stock Boom as CAC 40 Index Heads for Highs The Hang Seng Index Has Risen by Over 13% in 2 Weeks

Latest articles

Weekly Market Wrap With Gary Thomson: Nasdaq 100, NVIDIA, EUR/USD, Gold price
Financial Market News

Weekly Market Wrap With Gary Thomson: Nasdaq 100, NVIDIA, EUR/USD, Gold price

Get the latest scoop on the week's hottest headlines, all in one convenient video. Join Gary Thomson, the COO of FXOpen UK, as he breaks down the most significant news reports and shares his expert insights. Read the latest news

Analytical Tesla Stock Predictions for 2024, 2025 – 2030 and Beyond
Trader’s Tools

Analytical Tesla Stock Predictions for 2024, 2025 – 2030 and Beyond

Tesla's stock has experienced significant volatility since its IPO in 2010, driven by its significant technological advancements and status as a leading electric vehicle producer. This article explores Tesla's recent price history, analyses its outlook for 2024 and 2025, and

Commodities

Gold Price Drops Over 3.6% in 2 Days

The price of gold has fallen by more than 3.6% over 2 days, as indicated by today's XAU/USD chart. The day before yesterday, at the opening of the daily candle, the price of gold was $2421 per ounce,

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.