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Signals & Trading Plan for Monday 3/9/20

3/8/2020

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Down Trend Still Intact 
The Down Trend that started on February 19 is still intact.   The blowout move by $VIX $VXN on Friday 3/6 is still just an interim move.  So far we have:
  • Drop1:  Feb 19-28
  • Bounce1:  Feb 28 - Mar 4
  • Drop2:  Mar 4 - Mar 6

There are likely a few more moves at the minimum:  Bounce2, Drop3, Bounce3.
That’s the optimistic bullish scenario, a short-lived Down Trend that will eventually retest the lows October 2018 and then be done.   

In the super bearish scenario, this Down Trend can go down lower, as shown in $SPX weekly chart below.   If we end up with a financial crisis similar to 2008, $SPX can drop down as low as the low of February 2016.    That means $SPX can give up potentially 4 years worth of gain in a few months of sharp drops, similar to 2008-2009.
Picture

Reality is probably somewhere in between.  Right now, it is simply too early to project, but here are some projections by analysts that may be of interest to you.
  • The global recession is now Bank of America's baseline assumption.
  • In such a situation, Goldman estimates S&P 500 EPS would fall by 13% in 2020, and the index would decline to 2450 by year end.

Note that $SPX at 2450 is the zone where the last Down Trend of ended in Dec 2018.

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