While the Dow Jones is the most well-known US index in the world, the S&P 500 index better reflects the US stock markets thanks to its better composition and weighting of individual stocks. Unfortunately, my bearish assessment of the S&P 500 has been fully confirmed.
In April’s stock market horror month, every rally is immediately used for sales. It’s a bad sign. It doesn’t help that the current quarterly reporting season has been disappointing with a few exceptions (eg Apple or oil companies). As if stockbrokers didn’t already have enough to worry about with high commodity prices, historic inflation rates and the new Cold War.
S&P 500 Index: Historical chart pattern predicts further correction
The results of the major technology stocks in particular (notably Amazon and Netflix with very disappointing figures) are weighing on the stock markets. Because FAANG stocks are heavily weighted and dragging markets down. This means a particularly great danger for the Nasdaq high-tech exchange.
The technical situation of the S&P 500 index has also deteriorated considerably. A historical chart pattern of the past twenty years is being confirmed. After that, the S&P 500 index showed a chart evolution almost frighteningly similar to the corrections of the past:
Each time, the long-term bullish channel was broken. After an initial price drop, the index first swung sideways, then slid into a second wave of corrections. What are we currently seeing in the S&P 500 Index? The S&P broke its long-term uptrend channel in 2022 and is now exactly in sideways motion. So I can’t ring the bell for US stock markets.
Bitcoin: risk of further price declines
So let’s move on to bitcoin. Because we have seen over the past year that Bitcoin cannot escape a stock market correction. On the contrary. The correlation between bitcoin and US stock markets is at an all-time high. Therefore, my negative rating of Bitcoin has unfortunately been confirmed. It was right not to enter the crypto market too zealously.
Bitcoin is now at an important level: the crucial support zone around $37,000-38,000. If this mark falls, Bitcoin (and therefore also other cryptocurrencies) will experience a new wave of corrections. The first target zone is then 36,000 USD.
The lower line of the medium-term uptrend channel passes here. If Bitcoin falls below that, it will get really dark for Bitcoin fans in the medium term. Then the next target area is $28,000-$30,000!
Conclusion: The situation on the US stock markets is simply not good in the medium term. The technical chart also suggests that Bitcoin will not be the safe haven and therefore the solution. Because Bitcoin will also crash if US stock exchanges fall. Don’t let short-term rallies pull you out of your stash too soon.
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Daniel Wilhelmi
Daniel Wilhelmi was born in 1972 and belongs to the “new generation” of financial journalists who inherited the big names in television and the written press.