September 6, 2022, 12:44 pm EDT
The Shutdown of Nord Strom 1 Pipeline
The shutdown of the Nord Strom 1 Pipeline from Russia to German and European countries is another factor for the fragile stock markets. Although this could be a counterattack from Putin for various economic sanctions applied to Russia after the Ukraine invasion, it certainly escalates the tensions between Russia and European countries. The stock markets consider this news is a bearish threat to the already fragile conditions.
Indeed, when winter comes in the next several months we shall see how Germany and other countries handle this situation. Of course, Putin should be prepared if German / NATO decides to fight harder. We need to watch the energy sector and commodity prices of crude oil and natural gas closely to gauge the possible impact of inflation and its consequences.
Technically, all indexes keep falling since mid-August. Its free-falling style broke through all moving average lines (20, 50, 200) with hesitation. In our opinion, it could fall further until the low of mid-June. Currently, the lack of support serves as a signal of warnings. Because the markets could break down entirely through mid-June, it would trigger a major selling wave. Usually, the sell-off is accompanied by bearish news that pushes through the new bottom.
Besides the out-of-control inflation, rising rates, falling housing markets, a military confrontation in Europe (Russia vs German, etc) and Asia (US vs China), and economic collapses (Russia, China), are all there waiting for their moments to appear on headlines news.
The investment strategy should be in the defensive mode under this background.