As the economic virus spread across the U.S and Europe, worldwide financial markets pivoted dramatically to a risk-on mode, with global stock exchanges experiencing violent bearish market sell-offs, withdrawing support levels and plummeting in prices. It took over a year to see the initial positive effects wane as stock prices plummeted yet again in July. Then in August the bounce back commenced as stock markets across the globe picked up again on the hopes that the economic recession of Europe will not take as much time to recoup itself as the U.S. While European indicators point to an economy recovering slowly from its recent recession (with manufacturing rising and unemployment levels falling), many economists are predicting that the U.S. recession will be much longer lasting and more sustained. In fact, some experts are predicting that it could take up to two years for the U.S. to emerge from its double dip economic status.
The slowdown in global trade has affected every sector of the global economy. Just recently the finance industry was the first industry to feel the impact as consumer confidence ebbs and flows away from risky investments such as property, financial securities and equities. However, the slowdown in international trade has had a much wider ranging negative effect on all of the sectors of the global economy. For example, automobile manufacturers have shed millions of dollars worth of business as their local markets have contracted due to trade barriers with China, causing retrenchment in many U.S. car makers.
As Chinese officials criticized U.S. authorities for their handling of the economy, global financial markets were put on alert as investors worried that a possible “sterilized” reaction from Chinese authorities would lead to further volatility in global stock indexes. When the Chinese authorities released data showing that their gross domestic product rose 5% in Q2 2021 compared to the same period last year, global stock indexes tumbled on news that Chinese growth figures were revised. The bear market rally was triggered by government cuts to financial margins, which made it impossible for many Chinese companies to keep trading profitably. On the second day of the market swing, Chinese stocks rebounded as the pressure eased and markets slowly corrected.
While this may seem like an obvious prediction, few traders or investors were actually aware that the global stock index had begun a correction shortly before the Chinese data release. This is because most investors pay no attention to the opening and closing statements of corporations until the weekend or until the stock market begins to change direction. Typically, when companies release their quarterly profits or trade figures the news is only added to the stock market minutes before news is released live on television. By the time most investors realize that a correction is happening they are not trading hours away from the financial news and therefore miss out on significant gains. Many traders have made bad trading decisions simply because they did not pay attention to the global stock index prior to the news.
The global stock indexes typically begin a correction by moving up a few percentage points, but then they may reverse and fall back. The stock exchange may rally once more, but investors and institutions will need to wait a few more days for the markets to rebound before they can begin making big moves. Many investors also believe that the stock market will continue to move in a pattern until the end of the year. This is also another prediction that proves to be inaccurate.
To avoid predicting where global stock indexes will go, it is important to understand how the Dow and the FTSE 100 determine their activity. The Dow uses technical analysis to forecast where the markets will go next. The strength and volatility of individual companies to determine which direction they will move and which way they will head. While this method is considered one of the most accurate and science-based methods of predicting where the stock exchanges will go, many people have been able to predict the direction of the Dow by using only the information that has come out during the recent trading weeks.
Chart resistance is used to identify where a stock will likely reverse direction. Resistance occurs when a stock is climbing up and breaking through a set line, but then breaks down just below the line. A high price and a low price are usually associated with resistance. The top of the chart will have a color that is different than the rest of the chart. If a stock is breaking out of the current range and making a strong move upward, this is a good time to enter the market as long as the price is still within the current range.
The FTSE 100 is a combination of stocks from across England, Scotland, Wales, and Northern Ireland. This is a very large company in Europe that has been on a steady rise for the last few years. The index trading has been good for the past four months and has reached new highs on several occasions. The index trading has continued even as the U.K. economy itself has been in a significant downturn. Global stock indexes have done quite well during the past year or so, and many investors are still optimistic about the future. However, investors are now faced with the challenge of deciding how to manage their risks when trading on the Global Stock Index.