Calls are renewed for the necessity of the US Federal Reserve to take strong steps to control the high rate of inflation, including raising interest rates at a greater pace than the previous move of 25 basis points, as well as directing a strong and rapid reduction of the balance sheet through the disposal of assets amounting to about nine trillion dollars, Therefore, the markets are expected to show tension and continuous volatility in prices until the Fed meeting next May
The major stock indices in the United States and Europe fell at the fastest quarterly rate since 2020, as investor sentiment is still weak due to the acceleration of the high rate of inflation as well as geopolitical tensions that are linked to economic sanctions that may affect the global growth and increase the high inflation.
With rising expectations of a strong monetary policy tightening by the Federal Reserve to fight inflation, we have two negative indicators. The first is the reversal of the yield curve on US Treasury bonds, as the yield on short-term US Treasury bonds rose faster than the yield on long-term debt, raising the question of whether the reversal of the yield curve indicates a possible economic recession.
The second negative indicator is the intersection of the medium and long-term trend indicators on the movement of the stock market indices. By reviewing the charts of the Nasdaq and Dow Jones indexes, we have a negative intersection of the trend indicators for the last 100 days with the trend indicator for the last 200 days, and the intersection of these indicators may indicate a possible directional change.
The strange thing is that these negative indicators came at the beginning of the month of April, which is considered the second-best month of the year in terms of the historical performance of stocks. Therefore, the coming days will show us who will lead the market, will they move with history or will their movement be affected by negative indicators.
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