Dmitrii Ishutin @DmitriiIshutin: "🐻 Bearish outlook from Morgan..."

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🐻 Bearish outlook from Morgan Stanley 💡 Analysts at Morgan Stanley believe that the correction in the stock market is not over yet. According to their calculations, the S&P 500 could fall another 10% from current levels in the next three to four weeks. 📌 Reasons for continued correction — The fall in the US equity market will continue, according to analysts, partly because of mixed Q4 company reports. According to analysts, weak results and forecasts will make investors realise that economic growth has started to slow down. In addition, market participants are underestimating the implications of the Fed's tightening of monetary policy. 📌 Analysts' recommendations — Morgan Stanley recommends increasing positions in defensive assets before the continuation of the correction in the market. Analysts also argue that each S&P 500 group will face new challenges due to overbought assets. As such, they recommend building positions in individual stocks and not betting on growth in a particular sector. — Analysts add that investors should not concentrate on cyclical assets as economic growth has started to slow and high cost problems have not yet been resolved. 📌 Personally, I think at the moment there are more reasons to be bearish, rather than bullish. Fundamentally it is all clear — overbought and overleveraged tech stocks are getting hammered due to rising interest rates. Since they make up the majority of $SPX500 , they drag the whole index down. Let's look at the technical picture: — The index is charting an inverted triangle (marked by purple lines). This is a reversal pattern and is bearish. — The index is currently trading below its 50- and 200-day moving averages, as well as below the Ichimoku cloud. This is bearish. — I see 4,280 as a support level. If the weekly candle today closes below that level, I see further potential downside all the way to 3,730. The price target is charted as the distance between the support line and the top of the inverted triangle stacked underneath the support line. This indicates a downside of 12%, which is broadly in line with Morgan Stanley's expectations described above. — As to the oscillators, neither MACD nor RSI signal a trend reversal yet, although both are located in the deeply oversold territory. 💎 I remain cautious and do not rush to buy any tech drawdowns as there can be further downside. I favour commodities, financials, consumer discretionary and consumer staples. At the same time, I do not want to short the market or open new hedges at the current levels — there is a chance of a pull back as conviction in the US economy still remains high globally. Sometimes the most difficult thing to do it to do nothing. $SPY $SPY5.L $UVXY $SPXS 🌍 It is worth diversifying one's portfolio not only across sectors, but also across geographies. European market has delivered smaller returns compared to S&P over the last 2 years, European stocks are trading at lower multiples and pay out more generous dividends. Hence, they provide not only diversification, but also upside benefits. ___________________________________________________ 𝗗𝗶𝘃𝗲𝗿𝘀𝗶𝗳𝘆 𝘆𝗼𝘂𝗿 𝗶𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁𝘀 𝗻𝗼𝘄 𝗯𝘆 𝗮𝗱𝗱𝗶𝗻𝗴 𝗘𝘂𝗿𝗼𝗽𝗲𝗮𝗻 𝘀𝘁𝗼𝗰𝗸𝘀 𝗮𝗻𝗱 𝗿𝗲𝗰𝗲𝗶𝘃𝗶𝗻𝗴 𝗮𝗯𝗼𝘃𝗲-𝗮𝘃𝗲𝗿𝗮𝗴𝗲 𝗱𝗶𝘃𝗶𝗱𝗲𝗻𝗱𝘀 — 𝗰𝗼𝗽𝘆 𝗺𝗲. ✅ $18,000 invested on eToro ✅ 25.5% return in 2021 ✅ 4.25% portfolio dividend yield ✅ Risk score 4 ✅ European value, growth and income stocks 👍 Please take profit by pressing the Like button 🔔 To see more content like this alongside market updates, fundamental and technical analysis — please add me to your Watchlist 🔗 Want to network professionally? Add me on LinkedIn www.linkedin.com/in/dishutin/

5 Mentioned

SPX500

SPY

SPDR S&P 500 ETF

SPY5.L

SPDR S&P 500 UCITS ETF

UVXY

ProShares Ultra VIX Short-Term Futures ETF

SPXS

Direxion Daily S&P 500 Bear 3X Shares