From the “lips” of the central banks hang the stock markets marching towards a month that “scares” and under his well-known saying “Sell and Go”.
The fragile global financial landscape, the faltering confidence now evident in the international banking system on the basis of poor supervision, the fading “American dream” becoming a debt trap, and the escalating uncertainty as geopolitical balances are reconfigured and Crises follow one another in the twinkling of an eye, leaving little room for purchasing movements by portfolios, which are now putting a more “defensive” orientation on the rug when reviewing the scenario of a “hard landing” of the economy. A global economy that continues to “walk a tightrope” and has no “cushion” or “armor” against a sharp recession, even at a time when risks – mostly interconnected – remain much higher than they normally would
The high persistent characteristics that o structural inflation (the outlook is much more unfavorable in the Eurozone, which has not yet shown that it has reached its peak, so there will be a subsequent de-escalation) are the “root of the problem, creating doubts about the next movements and the expected “pivot” of the central banks. So either you live and settle -for the moment- with inflation well above the target, or you continue to raise interest rates, pushing the economies into recession, as a “necessary evil” for there to be a substantial de-escalation of the high inflationary pressures. In other words, they are invited to choose what they will sacrifice and under the weight of what effects.
However, to this problematic basis we must also add something high and rising double-digit food inflation; which also forms a “Perfect storm” for central bankers. The dramatic rise in food prices comes despite the fact that prices for basic food items have fallen sharply in the last nine months and are now lower than they were before the Russian invasion of Ukraine. Also, while some of the drop in wholesale food prices will be passed on to consumers, the burden relief will ultimately be fairly limited as the shift from wholesalers to retailers, higher energy and labor costs of labor and the maintenance of corporate profit margins are the main factors that prevent the immediate and significant transmission of the reduction in food prices to consumers.
And all this, with the oil below $80 a barrel. The “black gold” and the factors that threaten to put a new “fire” in its prices further narrow the room for maneuver of central banks. In particular, stronger-than-expected growth momentum in the Chinese economy as well as OPEC’s recently announced supply reduction will limit the amount of additional oil reaching the global market, and any further moves by the cartel could further boost prices. ., at a time when the risk of unexpected supply chain disruptions due to persistent geopolitical and security issues looms.
Of course, while all of this creates increasing pressure on the system and is placed on a broader time base, on the other hand, the Can, on its own, is a scary month for stocks. Historical data supports the foundation of your investment strategy “Sell and Go”, which finds markets underperforming in the May-October half, recording a much stronger move between November and April. Starting in 1945, it appears that the S&P 500 has posted an average cumulative gain of 6.7% in the period from November to April, compared to an average gain of about 2% from May to October. Of course, seasonal factors play an important role (as in the “Santa Claus Rally”) in strengthening this particular investment strategy, however socioeconomic conditions, business cycle and market environment they also “illuminated” some possible vulnerabilities in the perception and consolidation of this as a fixed rule. For example, the coronavirus pandemic also heavily affected markets during the period from November 2019 to April 2020, which is generally known as a period of high returns. On the contrary, an alternative option is the rotation and the differentiation of the portfolios, but based on the schedule of events in the US and Europe, the room for maneuver in the “hunt” for returns is limited for this month of May.
The international climate affects the Stock Market
In this scenario, the Bag having become independent since October 2022 – which marked the start of a great upward movement – it is now called to cope and build high “defense zones” to protect yourself from externally just like him internal “fires”. With only 14 meetings to go since the first electoral contest on May 21, the domestic market takes on more cautious characteristics, following the “path” of “profit taking” and looking for more attractive entry points in a broader “pullback”. . The continuity given in terms of the outperformance of the Greek economy, the better picture of the fiscal figures, the shooting distance that is far from investment grade recovery and also the strong set of results of the listed companies are “papers” powerful. for the long ones, who can easily “burn” in a possible trigger of an international liquidation. After all, the already gaping fissure left by central banks appears to be widening as do the banking “victims” that fall into it (Silicon Valley Bank, Signature Bank, then First Republic Bank with Credit Suisse collapsing in their absence the essence of the words “trust” and “reliability”). As you rightly say larry summers (Former US Treasury Secretary) “These things are like wildfires, it’s much easier to prevent them than to contain them once they start to spread.”
According to wave analysis and the Antonis Kofinako, Certified Derivatives Investment Adviser, Trader Education Manager at Trader24 and Professor of Financial Trading at Aegean College, The Bank Index peaked at 954.15 points on March 1 and then fell, posting losses of 26.4%. for twenty days. The downward movement of the price was marked by five downward waves, creating the promotional wave A. From March 20 to April 21, the corrective – upward wave B was marked in the form of three sub-waves (A – B-C). For the completion of the corrective wave B (A – B – C) the theory establishes that it occurs with the cathodic rupture of the fourth wave (IV) of subwave C. Additionally, it establishes that with its cathodic breakdown subwave B we will have an indication of the completion of wave B of the largest degree. Conversely, if the price breaks out of the fourth sub-wave (4) of wave A, we will have a “reverse head and shoulders” activation.
Your part has the same image – measure alpha bank. The fall registered in March with a structure of five sub-waves is the promotional wave A. Then it followed the corrective wave B where it ended on April 19 and according to the theory that we mentioned before, for a downward continuation, the price should break the subwave B of the B wave.
– For a better understanding and learning of wave theory, you can watch the video “Introduction to Elliott Wave Analysis” (https://www.youtube.com/watch?v=zps2pC9k7xc&t=1578s)
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