Stock markets have been on a long term bullish trend, since 2009, when central banks and governments around the world started throwing money at the economy like crazy, even though the world was still in the middle of the economic crisis. The US stock index S&P500 has climbed from around 6650 points, to 3,400.
But, the last two months have been really horrible for stock markets. They have lost more value than they did in a year, from 2008 to 2009 when the global financial and economic crises were at the peak. So, this suggests that the situation might be even worse now, than back then.
The decline has been really ferocious, which started when the virus got out of control in Italy. But, in the last week of last month, we saw a decent pullback higher, after central banks and governments started throwing money at the global economy, more so than in 2008-09.
Many governments and central banks have started stimulus packages worth the hundreds of billion of dollars, some also going into trillions, such as the ECB, the FED and the US government which introduced a $2 trillion bill. As a result, stock markets turned bullish for about a week, but the 20 SMA has been providing resistance in the last week in most major stock markets on the daily chart.
The climb has also ended at this moving average for S&P500, which has been pushing the price lower. This suggests that the retrace higher might be over for stock markets and now another bearish leg will take place, as the global economy slumps due to the shutdown.
On the other hand, if the virus starts to flatten out and decline, as it is doing in the most affected countries in the last several days, then this, coupled with the enormous amount of money already filtering through the economy, might benefit them and cause them to surge higher. So, this is a decisive time for stock markets. We will have to see how the situation with coronavirus develops in the coming days.