Global macro overview for 12/02/2018

Recent weeks have brought investors in the stock market a lot of excitement, as strong increases since the beginning of the year have been wiped away in a few sessions without major problems, and the stock market has again hit the tops of news sites as a negative hero. Nevertheless, the scale and speed of the decline in US indices may be appalling, but it should be borne in mind that the market has been growing virtually uninterrupted since the beginning of December, which always raises the fear of a sudden correction. In the macro evaluation and in the consensus for the company's results in January, little has changed, and the SP500 index recorded a nearly 5.0% increase. Meanwhile, yields on the government debt market steadily increased (American 10-year-olds by around 30bps in January) and the VIX index (22.64% in January), which warranted cautiousness and led to distrust in the sustainability of growth.

The correction proved to be sudden, but it does not change the year-long moderately positive attitude to the stock market, especially in Europe. In the US, the increase in the cost of money, wage pressure, and industrial inflationary pressures will begin to exert pressure on companies' margins, which will generate more negative results surprises and, as a result, a drop in analytical consensus and pressure on major indices. Recent developments in the stock market do not indicate a reversal of the trend, it is hard to reasonably expect that the almost 10-year-old boom will collapse in one month or a quarter. For this, you need a significant deterioration in macroeconomic readings and company results. Emphasizing once more, please treat the current declines as a normalization of the situation on the stock market, in the light of the anomaly of the January rally of indices.

Let's now take a look at the Dow Jones Index technical picture at the H4 time frame. The market has managed to retrace 50% of the last leg down and stopped at the level of 24,385. The growing bearish divergence suggests more upside price action as there is still a room for a longer and more complex corrective bounce. The longer time frame trend remains up. The next Technical resistance is 61% Fibo at the level of 24,548.

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