what is a bear market

Horizontal trends, often referred to as consolidation, describe a stable market situation where prices neither exhibit a clear upward nor downward trend. This article delves into the significance of horizontal trends, exploring their characteristics and implications for traders.

Recognizing Sideways Trends

Consolidation, characterized by a balance between price peaks and troughs, differs in investment strategy from both downward and upward trends. Thus, understanding how to identify horizontal trends becomes crucial for traders.

Key Elements of Sideways Trends

Horizontal trends, also known as sideways or ranging trends, have distinctive features clearly visible on price charts. The longevity of prices staying in such a pattern makes recognizing this trend crucial for traders.

Identifying Horizontal Trends

To identify a horizontal trend, historical data spanning two to three weeks is necessary. This allows the identification of at least two maximum and two minimum values of the

Germany's Economic Déjà Vu: A Look Back and a Leap Forward

Bear market Friday

Jeffrey Halley Jeffrey Halley 06.05.2022 10:22
Equity markets take a tumble It’s a little hard to know where to start today after a massive risk aversion wave swept markets overnight, so let’s start where I believe the rot really began, the Bank of England policy decision overnight. The Bank of England raised rates by 0.25% to 1.0% in a split decision (three members wanted 0.50%), which was in line with expectations. It’s what they said, and not what they did, that saw sterling slump by 2.0%. The bombshell was the 2023 growth forecast, which was marked down massively to -0.25% from 1.25% previously.   The BOE basically said there was going to be a recession next year, somewhat at odds with the Federal Reserve’s statements that a soft landing was possible in the US. Overnight BOE officials basically said they were going to concentrate on tackling inflation because there wasn’t much they could do to offset a slowdown. UK consumers would, unfortunately, have to endure rising costs of living and recession headlock that would make Stone Cold Steve Austin proud. It is of little surprise that the BOE doesn’t intend to start reducing its GBP 875 billion balance sheet yet. The only positive being the BOE will likely hike rates in small increments and let markets themselves do most of the dirty work.   That is somewhat at odds with Fed Chairman Powell’s comments that the Fed would be able to engineer a soft landing for the US economy as it scrambles to get on top of inflation. Given the economics PHDs were adamant that inflation was “transitory” last year, I’m struggling to fully buy into that, and so it seems, is the street. I argued yesterday that hiking rates by 0.50% a meeting while scaling up quickly to sell USD 95 billion of bonds and MBS a month off their balance sheet wasn’t dovish at all. Also, Mr Powell’s comments had left plenty of wiggle room to hike by 0.75% if needed. 0.50% hikes could be as “transitory” as inflation. Markets seemed to come to that realisation overnight, US 10-year yields climbed back through 3.0% and stayed there, and everyone knows about the bonfire in equity markets.   The Reserve Bank of India blinked on inflation this week as well with their unscheduled rate hike. I actually applaud them for this; there’s no shame in effectively admitting you were incorrect and acting decisively to sort the mess out. Even an ECB member said overnight that a rate hike would be considered at the June meeting. Considering and doing are two different things though, although if EUR/USD is around parity, their thoughts might be focused. However, their rightful get-out-of-jail card is that they are rapidly moving to oversight of a pseudo-wartime economy.   Master fence-sitting vacillators, the Reserve Bank of Australia, though, haven’t made too many friends with their guidance. Hiking rates by 0.25% earlier this week, while still playing the dovishly hawkish card. The RBA Statement of Monetary Policy this morning though, told a rather different message and I’m wondering if they were hoping nobody was watching because it’s Friday. It massively raised trimmed mean inflation forecasts to 4.75% by December 2022, and 3.25% by December 2023, with core-inflation remaining above the 2-3% target band until 2024. It said it was appropriate to start normalising interest rates and that further increases would be needed to restrain inflation. Australian equities would have been battered today after the Wall Street slump overnight anyway but would probably have suffered a similar fate anyway after the RBA SoMP release.   Slowly but surely, the central bank fence-sitters are being dragged into the inflation fight, even if they are fighting dovish rear guard actions. The reality that inflation has returned to the world after 20 years, that the 15 year run of the cost of capital is zero per cent is over, or that we can no longer rely on central banks to reverse flow wealth transfers to homeowners and equity investors and corporate debt Caligula’s via quantitative easing, appears to be dawning on the world. We may well have reached peak globalisation and with China slowing, a process in place pre-covid-zero I might add, and a war in Eastern Europe that will price shock the world’s food and energy value chains, it is little surprise that equity markets might be having second thoughts about valuations, even at these levels.   And still, the week isn’t over, with US Non-Farm Payrolls still to come. Market expectations are for around 400,000 jobs to be added, roughly the same as March, with unemployment edging lower to 3.50%. A sharp divergence, up or down, from the median forecast, should produce a very binary outcome given the schizophrenic nature of the short-term financial markets at the moment. A print north of 500,000 should provoke a faster tightening by the Fed possible recession equals selling equities, bonds, gold, cryptos, DM and EM FX, buy US dollars reaction. Conversely, a print under 300,000 should see a sigh of relief less Fed tightening rally. Buy equities, bonds, gold, cryptos, DM and EM currencies and sell US dollars. It’s that sort of market.   Thankfully, most of us still have our weekends free, but if one wants to watch the direction of travel for market sentiment, the crypto-space this weekend might be interesting to watch, especially if we get some headline bombs. Bitcoin held support perfectly ahead of support at USD 37,400.00 on Wednesday, rising 5.20% in the general post FOMC relief rally. Overnight, it lost around 8.0% and traded as low as USD 35,600.00, crashing through the triangle support at USD 37,400.00. Negative developments over the weekend could spur a sell-off to around USD 32,000.00 settings Monday up for a bad start. If risk sentiment continues plummeting, the chicken bones on the technical charts suggest bitcoin could be on its way to USD 28,000.00 and then USD 20,000.00. HODL on for dear life.   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Mastering Forex Markets. A Comprehensive Guide to Navigating Sideways Trends and Consolidation Patterns

Mastering Forex Markets. A Comprehensive Guide to Navigating Sideways Trends and Consolidation Patterns

FXMAG Education FXMAG Education 12.01.2024 15:08
Horizontal trends, often referred to as consolidation, describe a stable market situation where prices neither exhibit a clear upward nor downward trend. This article delves into the significance of horizontal trends, exploring their characteristics and implications for traders. Recognizing Sideways Trends Consolidation, characterized by a balance between price peaks and troughs, differs in investment strategy from both downward and upward trends. Thus, understanding how to identify horizontal trends becomes crucial for traders. Key Elements of Sideways Trends Horizontal trends, also known as sideways or ranging trends, have distinctive features clearly visible on price charts. The longevity of prices staying in such a pattern makes recognizing this trend crucial for traders. Identifying Horizontal Trends To identify a horizontal trend, historical data spanning two to three weeks is necessary. This allows the identification of at least two maximum and two minimum values of the currency pair's price. If these points are at or near the same level, a sideways trend is assumed. Confirmation occurs when a subsequent peak or trough appears within the previously identified range. Strength of the Trend The strength of a horizontal trend is determined by two factors: the number of peaks/troughs within the range and the significant distance between them. A robust trend is indicated by numerous maximum or minimum points, along with substantial time intervals between peak and trough values. Occurrence of Consolidation Sideways trends commonly occur in two scenarios. Firstly, as a short-term pause within either an upward or downward trend. Secondly, it can manifest as an extended transitional phase between an upward and downward trend, signaling a potential change in price direction. Potential Outcomes of Sideways Trends The future course of a sideways trend depends on price behavior. Stability prevails when prices do not surpass support or resistance lines. The emergence of a higher peak or lower trough likely signals the beginning of a bullish or bearish market, depending on the direction of change. Strategies During Sideways Trends Consider various scenarios based on breakout direction and your market position. In an upward breakout, indicating a trend change, consider buying if you don't have an open position. If a downward breakout occurs during consolidation, signaling a price decline below the line, decide to sell if you have open positions. If a price drop is observed, it could signify the start or continuation of a downward trend, prompting caution or staying out of the market if you haven't initiated positions. Navigating sideways trends requires a keen understanding of consolidation patterns. Traders must recognize the signs, interpret price movements, and make informed decisions during horizontal market phases to enhance their success in Forex trading.

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