Have We Reached the Bottom? Here’s What to Expect Next Week

The Global Stock Market: A Period of Extreme Volatility

In recent days, global stock markets have experienced a period of extreme volatility triggered by the release of US unemployment data.
This has led to highly undecided market sessions, where bear traders and bull traders have fiercely clashed, generating rapid ups and downs.

Market Uncertainty and Investor Confidence

The uncertainty is dominating the markets, and the question on many investors’ minds is whether we have reached the bottom.
The latest stock market sessions seem to indicate a new stabilization in investor confidence levels, but how long will this recovery last?

What’s Happening in the US Markets?

On Wednesday, in the United States, the Nasdaq 100 provided a clear example of the current volatility.
Initially up 2% in the morning, the index then closed down 1.16%, erasing the previous day’s gains.
This pattern fully expresses the current lack of directionality in the market, with sessions starting in one direction and ending in a completely different one.

The volatility remains at peak levels, with the VIX index still at elevated values, although not at the peaks recorded during the COVID-19 pandemic.
This high volatility translates into uncertainty for investors, who struggle to predict the market’s future movements.
Thursday’s session also calmed the waters, with the tech index finally closing a session in the positive (+3.06%), although it is still early to determine with certainty whether the “great recovery” of the stock markets has begun.

Why Does the Situation Seem Better in Europe?

In Europe, the situation appears slightly different.
Despite initial concerns about an unstable economy, slow growth, and high inflation, European stock markets have shown signs of recovery.

While this recovery cannot be fully considered a “V-shaped” one, it offers hope to investors.
Ironically, it is the markets of the old continent, which until last week were seen as the most dangerous, that now seem less volatile.
The European volatility index, the VSTOXX, has not experienced a sharp spike like the American VIX.
Thursday’s session in Europe was positive and robust, suggesting a possible easing of economic concerns.

Outlook on the Stock Markets

The possibility of a recession in the United States has become a concrete possibility, supported by the forecasts of major investment banks.
JPMorgan has increased the probability of a recession by the year-end from 25% to 35%.

This increase is also confirmed by the behavior of the bond market: the US Treasury curve has continued to change, with the CME 2-year Treasury futures rising by only 2 basis points, while the 10-year futures have risen by about 8 basis points.
It is striking that, in the options market, put options on US Treasuries seem to prevail, indicating expectations of a decline, although yield declines are expected with the lowering of interest rates.
Weaker-than-expected demand in the 10-year Treasury auction has further strengthened these concerns.

Technical Analysis of the S&P 500

From a technical standpoint, the S&P 500 presents an interesting situation for analysts.
The significant support level is around 5200 points, a level tested multiple times recently and showing a certain resilience.

Similarly, the key resistance is located around 5400 points.
Surpassing this level could signal a recovery towards historical highs.
The RSI oscillator is currently around 40, after touching the 30-point mark, generating a price rebound in the index.