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The Big Picture and The Long Term Portfolio Tonight the Fed brought out their big weapons, but they failed to ignite a burst of buying. Instead, market responded by sending futures sharply down, and triggered limit down in the process. QE is a stop-gap measure to keep the financial system from a meltdown. But QE isn't a vaccine against the coronavirus. The Fed cannot stop social distancing, or lockdown, or quarantine. Until human activities can flow freely, economic growth cannot happen. In fact, the opposite is happening. We are seeing sudden and massive economic contractions. It is the equivalent of an economic heart attack. Back in early February, we shared this weekly chart with you, explaining that stocks are very overbought and are vulnerable to a serious sell-off. We pointed out that $SPX could drop as low as the 200-week EMA.  At the time the projection was greeted with skepticism, as the stock market was seemingly reaching an all-time high every day. It would mean big drop from 3385 to 2660. Fast forward 5 weeks, and here we are. On Thursday March 12, $SPX spiraled down to a low of 2479. Let’s zoom out on the monthly chart and take a look at how low prices can potentially go from here. Subscribe to read the full article, and get access to our daily trading plans immediately. Subscribe now and take advantage of our introductory low rate of only $39 per month. We have been posting lots of intraday and after hour updates.
Subscribe to read all the latest analysis, as well as our highly useful table of support and resistance levels for $SPX $NDX $RUT SPY QQQ TQQQ. Navigating The Crash
We won’t make you cry by discussing the stock market crash that’s happening right now. But let’s discuss what might be coming around the corner. Last night we outlined the super bearish scenario that can take $SPX down to the low of 2016. That’s $SPX reaching around 1810 potentially. This scenario may not happen right away, but there is now a rising probability of it happening, and it can unfold by end of this year. This is extremely disheartening, and not just because it may drag down our 401k accounts for a long time. Jobs, livelihood and lives will be impacted, in a big way. That’s the scariest part. So how do we provide trading advice when it’s raining black swans? The truth is we cannot. But we can share with you the lessons we learned trading through 2008-2009 crash. Maybe you can gain some insights and benefit from our experience. One of the lessons we learned is that in fast moving time like this, it’s best not to try to trade every move in the market. Whipsaw is everywhere. We may all be better off just chilling for a day or two and see how events unfold. We also learned not to chase the small bounce. The potential risk:reward ratio is not very favorable. We found that it’s better to wait for the really major support zones to be reached before betting on a substantial bounce. Finally, remember that we are in a Down Trend. So instead of obsessing about buying the dip, we should be thinking about selling the rip. Subscribe to read the full article, and get access to our daily trading plans immediately. The full article covers: Long-term Support & Resistance Levels
Market Internal Indicators
Market internal indicators give us a daily glimpse into the short-term direction of the market. Trading Plan
Subscribe now and take advantage of our introductory low rate of only $39 per month. 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:
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.  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.
Note that $SPX at 2450 is the zone where the last Down Trend of ended in Dec 2018. Subscribe to read the full article, and get access to our daily trading plans immediately. The full article covers: Short-term Support & Resistance Levels
Market Internal Indicators
Market internal indicators give us a daily glimpse into the short-term direction of the market. Trading Plan
Subscribe now and take advantage of our introductory low rate of only $39 per month. The Fed announced an emergency rate cut of ½ point today. Initially, traders jumped in to buy. That pushed $SPX $NDX $RUT to strong resistance levels, where they quickly formed bearish spires and dropped quickly. The actions put an end to Bounce1.
Just to refresh your memory, here are the phases so far in this Down Trend.
This was the case of “buy the rumors; sell the news”. Traders have been bidding up prices since Fri Feb 28 in anticipation of an emergency rate cut. The Fed delivered it, but it’s not as big as everyone was hoping for. Additionally, the message from the Fed made the market nervous. According to Bloomberg: Even as the Federal Reserve chief delivered additional stimulus, he acknowledged that this easing is insufficient to solve the myriad economic and health risks posed by the coronavirus. That’s self-evident, but a message neither businesses nor consumers were ever likely to take in stride. Support & Resistance Levels The S/R levels below are short-term projections of important price levels. These are places where the majority of buyers and sellers are likely to lurk. You will want to pay attention to the change in price behaviors around these levels. Subscribe to read the full article, and get access to our daily trading plans immediately. The full article covers: Short-term Support & Resistance Levels
Market Internal Indicators
Market internal indicators give us a daily glimpse into the short-term direction of the market. Trading Plan
Subscribe now and take advantage of our introductory low rate of only $39 per month. On Feb 6, we shared an important $SPX chart with our readers and wrote :
When $SPX price is 25% or more above its 200-week EMA level, it’s a reliable signal that stocks are very overbought, and are vulnerable to a serious sell-off. This type of sell-off qualifies as Down Trend because it typically takes $SPX price back to the 200-week EMA level, and it tends to last multiple weeks. From that date onward, we continued to recommend to our readers to consider gradually “selling high” the stock portion of their long-term portfolio. We did not anticipate though how low stocks would go and how fast it dropped. The magnitude and speed of last week’s drop certainly took everyone by surprise. The Wall Street Journal’s main headline this morning was “Stocks were soaring. What happened?” Stocks are certainly in a Down Trend now. The question is how long will this Down Trend last and how low will it go? For that we offer to you the following chart. This is $SPX weekly chart from 2015 until now. It shows some key resistance levels for $SPX to surpass during the upcoming bounce. It also shows the key support levels that $SPX will continue to retest on when the Down Trend resumes again. To view the charts, read the full article which covers: Short-term Support & Resistance Levels
Market Internal Indicators
Market internal indicators give us a daily glimpse into the short-term direction of the market. Trading Plan
Subscribe to read the full article. $SPX $NDX $RUT are now in Major Pullback5. Futures are showing a bit of a bounce in price tonight. Here are some key questions to ponder:
It turns out that there is a wealth of information in $VIX $VXN charts to help guide us in deciphering the bottom. And we have found that volatility charts are much more reliable in their signals than price charts. You are not as likely to fall into bull or bear traps. But $VIX $VXN charts are not easy to decipher. So read our latest trading plan for analytical techniques to determine the answers to these questions. The full article covers: Short-term Support & Resistance Levels
Market Internal Indicators
Market Projections and Trading Plan
Subscribe to read the full article. $SPX $NDX $RUT continued to drop on Fri 2/21. This stirred up talks of rate cuts. The Fed is murmuring soothing noises, and they are still pumping money into the system, but the scary part is they may be out ammunition when the economy really falls apart.
From Bloomberg: "Federal Reserve policy makers sound cautiously confident they’ve got interest rates about right as they assess the fallout from the spreading coronavirus. What worries them though is their ability to rescue the U.S. economy should things go horribly wrong.” This certainly does not instill long term confidence, but market participants are likely to be satisfied with more short term rate cuts, and more easy money for now. What this means is that in the short term, we most likely won’t see an end to the current Up Trend just yet. However, the market and the economy are increasingly vulnerable to events with big bearish consequences. And when things fall apart in a big way, the Fed may not be able to come to the rescue effectively. Support & Resistance Levels The S/R levels below are short-term projections of important price levels. These are places where the majority of buyers and sellers are likely to lurk. You will want to pay attention to the change in price behaviors around these levels. Read the full article to get the complete analysis. The full article covers: Short-term Support & Resistance Levels
Market Internal Indicators
Scenarios to monitor for on Mon
Market Projections and Trading Plan
Subscribe to read the full article. Futures are down as we write this on Wed evening 2/19. Market participants are starting to get more nervous about the growing infection rate worldwide, and the economic impact of the coronavirus, as demonstrated by Apple's warnings on Tue.
"Goldman Sachs sounded the alarm to clients about a possible correction in the stock market, noting investors are underestimating how big of a risk the coronavirus really is." According to Goldman: “While a sustained bear market does not look likely, a near-term correction is looking much more probable.” -CNBC So does this mean $SPX $NDX $RUT will undergo a Big Dip or a Major Pullback starting tomorrow? What's happening to Surge11 of the Up Trend? Read the full article to get the complete analysis. The full article covers: Market Internal Indicators
Short-term Support & Resistance Levels
Market Projections and Trading Plan
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