Stock Markets React to Amplified Global Trade Tensions, But Does This Change the Long-Term View?
Most stock indices around the world closed March (and Q1, 2025) in negative territory after a fair amount of volatility, but the month and quarter came to an end on Tuesday - the week wasn't done. On Wednesday, April 2, the U.S. announced the much-anticipated global tariff plans and stock markets reacted swiftly with negative closes for the week, as evidenced by the S&P 500 Index (-9.08%) and STOXX Europe 600 (-8.44%).
So, is this just a "correction" or have the markets really turned "bearish" from a trend perspective?
Let's take a step back and look at how major stock indices are performing on a monthly-closing basis.
In the U.S. the Dow Industrial Average Index (-4.20%), the S&P 500 (-5.75%), the NASDAQ Composite Index (-8.21%), the NASDAQ 100 Index (-7.69%), and the Russell 2000 Index (-6.99%) all closed March in the red. Not surprisingly, the volatility index (VIX) had a sharp move up to close the month (+13.50%) - it's second straight double-digit % increase on a monthly basis (+19.48% in February).
In Europe, the STOXX Europe 600 (-4.17%), UK's FTSE 100 Index (-2.58%), Germany's DAX Performance Index (-1.72%), France's CAC-40 Index (-3.96%), and Italy's MIB Index (-1.56%) all closed down for March.
Elsewhere, the Canadian TSX Composite Index (-1.87%) and Australian ASX 200 Index (-4.03%) followed suit, but in Brazil the Ibovespa Index (+6.08%) was a notable outlier closing in positive territory.
In Asia, the NIKKEI (-4.14%) and KOSPI (-0.56%) both closed March in negative territory, but in Hong Kong (HSI +0.78%) and China (Shanghai +0.45%) stocks were able to eek out a positive close, albeit slightly.
That's a fairly consistent picture of negative closes, but it does not necessarily mean there is a change in the long-term trend (at least not yet). It's still too early to broadly say global stocks have truly turned bearish, but it's certainly a good time to stay up on your market research. We are in a period of uncertainty with more choppiness most likely ahead, but as of this posting a number of markets still have levels of technical support to watch. Will support hold in the coming weeks and months?
Let's now turn our attention to the price charts for a visualization of current state.
For those with a long-term time horizon, try to keep an unemotional perspective during volatile times like these. Study market behavior across multiple time levels (daily, weekly, monthly, etc) for the best perspective.
When looking at the charts, pay attention to the Energy Model oscillator (green and red bars at bottom of chart) - zoom into any consecutive spikes of energy well above it's moving average as it may signal a risk of losing momentum ahead. At the same time look to the Stochastic oscillator (blue, red, yellow lines) - pay attention to line crosses and how/if they align with price movement over time.
The computer-generated trend lines also help visualize possible areas of technical support and resistance, but this isn't necessarily a complete view, nor is it set in stone. Trend lines can change with more price data, new highs and new lows.
Weekly Global Stock Market Charts for a more narrow view on current price activity, no surprise you see notable cresting of Energy with crosses to the downside by the blue line in the stochastic studies (in some cases the blue and yellow both cross below the red).
Monthly Global Stock Market Charts offers a broader picture of price movement, and while you'll see some early cresting of Energy, the stochastic crosses are more isolated to the blue (fast) line thus far, which is to be expected during times of sharp price changes.
Notes on Stochastic studies:
- The Socrates Platform has a unique three-measurement Stochastic oscillator: Blue (a "fast" measure), a Yellow (a "mid" measure), and a Red (a "slow" measure).
- When you log into Socrates you'll see the Stochastic values: >80 is commonly interpreted as a market with potentially "overbought" conditions, whereas a value of <20 is considered possibly "oversold" conditions.
- On a price chart, look for Stochastic line crossovers. Generally speaking, a "fast" crossover is typically associated with price direction changes, whereas a "slow" crossover is often considered alignment of momentum and trend.
- In Socrates specifically, look for when the blue and yellow both cross the red:
- A cross above the red (when <20 value, or "oversold" conditions) can be a relatively strong signal that a move up may be underway (i.e. red will be the lowest position / value of the three in this scenario)
- A cross below the red (when >80 value, or "overbought" conditions) can be a relatively strong signal that a move down may be unfolding (i.e. red will be the highest position / value of the three in this scenario)
- This study most helpful on Monthly time levels, but it can be helpful to follow along more frequently using the Weekly time level as it could indicate how the next month may form. Also good to check Quarterly view to maintain a longer-term perspective.
- Keep in mind a "fast" (blue) stochastic is more sensitive to recent price changes than a "slow" (red) stochastic. In Socrates, this can also be true for the "mid" (yellow) stochastic.
- Given the Daily time level is most vulnerable to volatility, monitoring stochastic values on the Weekly time level (after each weekly close) it can help filter out some of the noise. Ultimately it's good practice to see if this behavior on the Weekly aligns with values on the Monthly time level (after a monthly close).
- Important: Stochastic studies alone are not necessarily a sign of a true change in trend. Look to align this behavior with other data and indicators within Socrates.
Remember, researching across different time levels (daily, weekly, monthly, etc) offers a much better view of short-term vs long-term. Daily or intra-day price activity can be helpful when considering potential entry or exit points, but is most vulnerable to spikes in volatility with reactionary or false moves - best navigated by experienced traders and financial professionals.
If you're primarily concerned with long-term performance, it is best to focus on the Monthly (and even Quarterly) time level, using Daily and Weekly more as a pulse read in the interim (especially if you see consistent behavior building up week after week that may lead to possible changes on the Monthly level).
Important: no matter how much research you do financial markets are risky and can behave unpredictably on a short-term basis. Even bullish markets will "correct" from time-to-time (regardless of why), but that doesn't necessarily mean a change to the long-term trend (typically requires a sustained move over multiple months breaching key technical levels and triggering key indicators).
Log in to Socrates to research these and other global financial markets.
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With over 1000 global financial instruments to research - including stocks, ETF's, commodities, bonds, foreign exchange / currencies, and more - the Socrates Platform allows members to monitor financial market activity from around the world using price charts, technical studies (stochastic values, moving averages, etc) and custom watchlists.
In addition to our Energy Model mentioned in the charts above, all Socrates users have access to computer-generated indicators, such as our proprietary Global Market Watch pattern recognition system and our Indicating Ranges across multiple time levels. These color-coded signals act as a complement to more detailed studies of price charts and technical price levels.
Pro and Enterprise members can go deeper in their research with the Reversal System and Timing Arrays, as they look for additional areas of potential technical support, technical resistance, and possible turning points ahead.
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NOTE: The Socrates Platform is not a financial service and does not provide financial advice. It is a research platform for informational and educational purposes only. Investments and trades include risk of financial loss. Before making any investment or trade, it is important to consider whether it is suitable for you. Consider seeking advice from a certified financial adviser.
