Do the recent financial market crashes precede a sustained rebound or a new wave of bears? Here are the answers from technical analysis professionals.
Supports, resistances, moving averages, Fibonacci ratio, Bollinger bands, Ichimoku cloud … In this turbulent start to the financial markets, traders have pulled out the full armory of technical analysis to inform their decision making.
Timing seems crucial as fear indicators (put / call ratio, trading volumes on trackers, volatility) have registered worrying peaks, while the American Association of Individual Investors (AAII) has seen that the results of its weekly survey are gradually turned red since the beginning of January: “The bearish sentiment has reached its highest level in the last eight years,” the AAII points out in a note dated January 27th.
The major stock indices, therefore, after moving into an uptrend since March 2009, have rapidly lost ground from the first cracks observed in November 2021. However, the graphical analysis shows, by taking a step back, that the direction of the markets remains broadly positive, as indicated by the movement of the moving averages.
“It is not a divination art”
And the previous bullish momentum was such that the indices seem to want to catch their breath by operating some form of consolidation.
For example, the Nasdaq Composite softly stopped at the end of last week on long-term oblique support linking all subsequent peaks established between April 2010 and February 2020, all on a RSI showing an excess of short positions. Although a rebound is quite probable at this stage, the next few weeks will be decisive to see if the indices can make new highs.
However, the hypothesis of a reversal of the downward trend is also in the works. “Technical analysis is not a divination art. We establish different scenarios depending on the configurations we observe on the evolution of prices ”, warns the expert of a large investment bank who wants to remain anonymous.
Man is an “elliotist”. In other words, he applies the Elliott wave method whereby the market moves in five successive waves (three bullish and two bearish). According to his count, the indices would have completed their full bullish cycle after forming the top of the fifth wave. This latest market surge usually coincides with the massive influx of retail investors. A phenomenon that the MFA has been able to observe since 2020 in France. According to this particular reading of the charts, the market would have started a correction phase.
Everyone has their “little tricks”
But there is more than one chapel in technical analysis. Each analyst develops a particular vision, like Laurent Albie, who favors a global approach based on the relationship between economics, financial markets and the psychology of operators. “You have to understand where the flows are going”, insists the expert.
Others, like Christophe Machinot, prefer to rely on graphs with different time units: “I look at the graphs simultaneously in 15 minute, 1 hour and 3 hour increments,” reveals the analyst.
While everyone has their own little tips for analyzing financial markets, they all unanimously point out that a good analyst must have enough humility to admit that he could be wrong.
Laurent Albie: The next momentum
CAC 40: «The structure of the increase is still favorably oriented “
The uptrend that started in March 2020 is still relevant. The structure of the climb remains well oriented with lows and highs all ascending.
Furthermore, since November 2020, the weekly closes have always occurred above the 22-week exponential moving average. The increase in volatility since the beginning of the year has not changed this situation to date. However, we perceive a slowdown in the rate of price progression which could lead to an entry into consolidation.
The bearish divergence of the RSI heralds this possibility. A drop in the area of 6650 points is possible, but would not alter the positive direction of the price.
On the other hand, breaking the support level at 6400 points would increase the risk of a bearish reversal towards 6120 points.
Valentin Aufrand: independent analyst
American loan: “The outlook is bearish under an area between 1.77 and 2%”
The yield on the US 10-year bond rebounded to its highest level last year, around 1.77% in January. This threshold appears to act as a resistance, suggesting that a breach seems unlikely in the coming months given the economic slowdown.
Indeed, the trend in long-term yields is heavily dependent on the economy, as indicated by the correlation of the chart with the ISM manufacturing index (a leading indicator of GDP growth). The outlook is therefore bearish below an area between 1.77 and 2%. The scenario of a return of the 10-year interest rate to last year’s low of 1.13% is favored.
However, exceeding the range 1.77-2%, the 10-year rate would form an “ascending triangle”, ie a graph favorable to the continuation of the rise.
Alexandre Baradez: IG
Euro dollar: “The scenario of further consolidation seems the most likely”
The euro has been declining against the dollar for over a year, reflecting the inflation and growth differential on both sides of the Atlantic, but also the differential in the pace of monetary normalization between the US Federal Reserve and the European Central Bank (ECB). ).
This downside potential should logically be reduced this year and the euro could find support in the $ 1.08-1.10 zone as the ECB will need to strengthen its inflation stance in the euro zone.
For 5 years the currency pair has been evolving in bevel and we are approaching the bottom: the scenario of a continuous consolidation seems the most probable with a return in the 1.15 / 1.20 dollar zone to be anticipated in the coming months. The decline in the euro also corresponds to a return to the top of a previous long-term bearish channel that should provide support.
Vincent Ganne: independent analyst
Bitcoin: “The price of Bitcoin will continue its upward trend”
My approach is to go step by step. And the first step is to take stock of the past year. In the world of cryptocurrencies, 2021 marked the great comeback of altcoins [NDLR : cryptomonnaies apparues après le bitcoin].
This dynamic carries a very positive message for this environment. Bitcoin’s dominance has dropped by more than 40% even though its performance has risen to 43% over the past year.
In my market expectations for 2022, the price of Bitcoin will continue its slow and erratic upward trend towards $ 80,000 after finding strong support in the $ 25,000-$ 30,000 area that will allow for a rebound in the first quarter of 2022. As for Ethereum, it will continue to outperform with a dominance dynamic that will in any case tend to that of bitcoin.
Christophe Machinot: analyst, general secretary of Afate
OR : “The passage of 1960 dollars would lead to a return to historical highs”
Gold has been in a solid uptrend for over 15 years. Its 200-month moving average began its extension movement in 2006. At the time, the ounce was trading between $ 400 and $ 500. What a long way to reach an all-time high of $ 2070 in August 2020!
Currently the Bollinger Bands tell us that, just as in the past, overshooting one of the boundaries could lead to a violent movement.
In the medium term, two scenarios arise.
First, the sub-$ .680 range has just collapsed and the natural goal would be to find the 200-day moving average, around $ 1,400.
The second: exceeding the upper band around $ 1,960 would cause a return to all-time highs, even a euphoria that could lead to levels of $ 2,500 or $ 3,000.
Andréa Tueni: Saxo Banque
S&P 500: “Inflation raises fears of a more rapid monetary tightening by central banks”
Several files interrupt the long forward running of the indexes. As a leitmotif, rising inflation raises fears of more rapid monetary tightening by central banks and especially the Fed. The market expects three to four rate hikes.
Technically, the alert began with the index closing below its 200-day moving average on January 21 as a divergence appeared.
Graphically, the level of support that would allow the index to take a break and move forward is in the short-term area of 4220-4260 points, which corresponds to 23.6% of the Fibonacci retracement as well as at the level of support on the RSI. .
Given the absence of an intermediate zone, the breakout of this level could precipitate a significant downward movement towards the 3840 point zone.
Daniel Cohen de Lara, President of Afate (French Association of Technical Analysts)
“You have to work for a long time to master technical analysis”
What is Afate’s mission?
We have set ourselves four priority objectives: to maintain high standards of professional qualification for technical analysts, to enlighten the public and the financial community on the possibilities of technical analysis, to organize events to promote exchanges and finally to support the learning of technical analysis. One of Afate’s particularities is that of bringing together professional players and private investors within the same association. We also provide access to international certifications (CFTe and MTA) of Ifta (International Federation of Technical Analysts), an association of which we are members.
What advice can you give to beginners?
As in many areas of expertise, it takes a lot of work, over a long period of time, to master technical analysis. A common mistake is to stop too early when you think you have spotted two or three walking figures at any given time. You have to analyze thousands of charts and understand the psychology of the markets.
How to train well in technical analysis?
Today there are few structured and structuring training courses in technical analysis. It is therefore necessary to study a number of books such as Technical Analysis of Financial Markets, by John Murphy, Graphical Analysis of Stock Market Trends, by Robert Edwards and John Magee, or Technical Analysis, by Thierry Béchu, Éric Bertrand and Julien Nebenzahl.
For its part, thanks to its exchange network where we find the best professionals in the country, Afate is able to provide support to its new members. We offer them the opportunity to participate in seminars that have an educational purpose or to attend conferences led by professional analysts