Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Who is Spreading the Virus? UK Coronavirus 2nd Wave Analysis - 30th Sep 20
Gold And Silver Follow Up & Future Predictions For 2020 & 2021 – Part II - 30th Sep 20
The Only Thing Systematic Is The Destruction Of America - 29th Sep 20
Fractional-Reserve Banking Is The Elephant In The Room - 29th Sep 20
Gold And Silver Follow Up & Future Predictions For 2020 & 2021 – Part I - 29th Sep 20
Stock Market Short-term Reversal - 29th Sep 20
How Trump co-opted the religious right and stacked the courts with conservatives - 29th Sep 20
Which RTX 3080 GPU to BUY and AVOID! Nvidia, Asus, MSI , Palit, Gigabyte, Zotac, MLCC vs POSCAPS - 29th Sep 20
Gold, Silver & HUI Stocks Big Pictures - 28th Sep 20
It’s Time to Dump Argentina’s Peso - 28th Sep 20
Gold Stocks Seasonal Plunge - 28th Sep 20
Why Did Precious Metals Get Clobbered Last Week? - 28th Sep 20
Is The Stock Market Dow Transportation Index Setting up a Topping Pattern? - 28th Sep 20
Gold Price Setting Up Just Like Before COVID-19 Breakdown – Get Ready! - 27th Sep 20
UK Coronavirus 2nd Wave SuperMarkets Panic Buying 2.0 Toilet Paper , Hand Sanitisers, Wipes... - 27th Sep 20
Gold, Dollar and Rates: A Correlated Story - 27th Sep 20
WARNING RTX 3080 AIB FLAWED Card's, Cheap Capacitor Arrays Prone to Failing Under Load! - 27th Sep 20
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelerting Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Stock Performance in the Rising Coronavirus Fever

Stock-Markets / Stock Markets 2020 Feb 28, 2020 - 02:01 PM GMT

By: P_Radomski_CFA

Stock-Markets

The bulls didn’t really get their act together yesterday, and the early gains evaporated a few hours into the session. As stocks closed near their daily lows, what chances of invalidating Tuesday’s  breakdown below the important support do the buyers have?

Let’s briefly check what kind of progress the bears made yesterday on the weekly chart (charts courtesy of http://stockcharts.com).


Having reached its midpoint, the bears are cutting ever deeper into the rising black trend channel. Our yesterday’s observations ring as true today as they did yesterday:

(…) Yesterday’s slide turned the weekly indicators’ sell signals even more into negative territory. The bulls woefully failed to lift prices and this week’s sizable bearish gap stands unchallenged. Both the gap and the indicators continue to support the bears.

The preceding divergencies are still being resolved. Let’s quote our Monday’s observations when we discussed the comparison between:

(…) the levels of both of these indicators with the price action. Stocks have been rising while both the RSI and CCI made lower highs. You can see it marked on the above chart with thin black lines. We have two divergences here – in other words, they didn’t confirm the price advance.

Now, let’s focus on yesterday’s session on the daily chart below.

Despite the bullish opening gap and the buyers keeping momentum for a few hours after yesterday’s open, stocks rolled over to the downside. As the index was giving up its opening gains, we’ve sent a quick intraday Alert to our subscribers, telling them about our decision to jump in on the short side.

And as you can see on the chart above, it was a profitable trading move. Especially if you take a look at today’s premarket action – after yesterday’s 3117 close, the futures are quoted at 3085 currently, and set to open with yet another bearish gap today. More power to the sellers.

We’ve seen another overnight bounce that fizzled out. The bulls made it to 3104, but were unable to keep gained ground again. Looks like one more dead-cat bounce that’s over.

There are quite a few reasons for why this slide has more to go.

Yesterday, we have commented extensively on the coronavirus. Let’s recall the key aspects and build up on them:

(…) As stocks started their recovery earlier in February, it was driven by the widespread assessment that coronavirus would be contained and dealt with within China. That has clearly not happened and there’re multiple signs that the crisis is far from over. So are its economic costs and supply chain disruptions.

Let’s recount the facts. The Iranian coronavirus strain is different from the Wuhan one, highlighting its ability to mutate. We now face self-sustaining outbreaks around the world. Just how have they leapfrogged the harsh quarantines in China? The fear around the world is palpable and the US is starting to catch up. Incidentally, the CDC announcement that it’s a question of when rather than if coronavirus reaches America, poured fuel to the fire.

And the array of industries affected by the hits to their production and logistics lines is growing. That affects both product rollouts and earnings expectations. We’ve seen that earlier e.g. with Apple. The virus fallout is growing, and the narrative has taken over the market place. US – China trade war or other issues are very much on the back burner now. Unless the central banks step in more aggressively, the virus fallout recognition will rule the day.

While the bets on Fed rate cuts coming soon have increased, we haven’t seen any shift attributable to coronavirus in Fed governors’ rhetorics just yet. As the charts below (courtesy of Google Trends) show, the US still remains relatively complacent on coronavirus compared to the rest of the world. Human nature is universal, and once confirmed positives start cropping up, the Americans’ fear level will move higher as well.

And taking into account that the second wave of spike in fears is virtually guaranteed to surpass the first one, we’ve quite a way to go in the States. With the speading count of infections in various countries, the world is becoming recognized as coronavirus’ oyster now. And this would bring more attention and consequences than when it was perceived as a China affair only.

Have you seen the Trump and coronavirus Task Force press conference? Assurances and hints that the impact on the American people would be low. Knock-on effects appear being downplayed. That doesn’t square off with the CDC’s Nancy Messonier point on inevitability of community outbreaks, perceived lack of functioning testing kits on the ground, or the Atlanta airport GM saying that 200 passengers showing coronavirus symptoms being just told to self-quarantine…

Orange County declared emergency. Michigan is monitoring over 300 people for coronavirus but zero have been tested. In public consciousness, this has further to go before true panic has been reached. The reality is currently only starting to be recognized, there’s still some denial present in the mix. Burying head in the sand, if you will.

Fundamentally, we haven’t yet seen earnings impact. The same goes for mounting supply chain disruptions. Consumer confidence still remains high. So do sales. That’s the low-hanging fruit…

It should not come as a surprise, that the risk-off trade is hotly pursued.

Let’s explore its two leading metrics – we’ll start with US Treasuries examination.

On the long end of the curve, there is the 30-year bond. Its yield has been plunging to new lows. That’s what happens when there’s high demand for the bond – its yield goes down as the holders demand a higher price to part with the bond. See for yourself the below chart.

It indicates fear, which puts pressure on risk-on assets such as stocks. We are talking stocks as a whole, the full spectrum – not the defensive ones such as healthcare, consumer staples or utilities – these usually perform better than their more sensitive peers in such times.

Another way to assess the flight-to-safety trade, is to look at the performance of Japanese yen. Similarly to Swiss franc, it acts as a safe-haven currency. These currencies rise as investors seek refuge, making even the mighty dollar suffer.

Remember, these are the carry trade currencies. Their negative yields serve as the incentive for traders to borrow in them, turn around and invest into yield-bearing assets elsewhere – be it the safety of Treasuries or various emerging markets’ assets. These no-brainer trader work just great – until they don’t. Unwinding these investments weighs on heavily on the markets.

So, let’s see how the Japanese yen (both a safe-haven and carry trade currency) has been doing lately:

Breaking below the declining black trend line appears to be a question of a relatively short time. The daily indicators clearly favor more downside. The 50-day moving average or the rising red trend line can give the bulls the reason to step in, as yesterday’s rally has clearly fizzled out.

Either way, there’s quite some way to go on the downside. Fundamentally speaking, that would provide stiff headwind to stocks – just as the falling bond yields do.

Let’s turn again to our yesterday’s words:

(…) Downside moves during bull markets are here to either scare you out, or wear you out. This is the formed case. Let’s remember the big picture though – we’re in a stock bull market, actually the longest-running one, and there’re sizable gains ahead to enjoy down the road.

That’s true despite all the damage we would see on the monthly chart when February is over, but arguably, we’ve not yet reached the moment of blood in the streets. Yesterday’s notable absence of the bulls is a not-so-subtle proof of that.

While it’s true that markets and forward-looking and discounting mechanisms, they appear not to have yet digested the coronavirus impact whose count is rising day-by-day.

Taking all the above into account, our profitable short position remains justified (position details are reserved for our subscribers) and unless we see a true game changer, rallies are to be viewed with suspicion. In the current environment, we aim to ride the very likely downswing all the way to the next important support and possibly beyond. Depending on the commitment of the bulls and breaking announcements, we’ll manage our open trade accordingly.

Summing up, the medium-term S&P 500 outlook has shifted to bearish, and more downside remains probable before this correction is over both in time in in price. Both the daily and weekly charts attest to that. The divergencies between RSI, CCI and stock prices aren’t yet finished being resolved to the downside. The slide continues and all we’ve been getting, were dead-cat bounces. While the daily volatility is at recent record highs, the weekly one still has a way to go. The failures of the bulls throughout the week favors more downside before the panic selling is over – and we aim to milk it for what it’s worth. We’ve not yet seen a catalyst that would facilitate the reversal higher, and buy-the-dip mentality doesn’t seem to be a winning proposition these days. While the stock bull market remains intact in the long term, it appears too early to bet on letting its many long-term bullish factors work to our benefit.

We encourage you to sign up for our daily newsletter- it's free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Monica Kingsley

Stock & Oil Trading Strategist

Sunshine Profits - Effective Investments through Diligence and Care

Monica Kingsley is a trader and financial markets analyst. Apart from diving into the charts on a daily basis, she is very much into economics, marketing and writing as well. Naturally, she has found home at Sunshine Profits - a leading company that has been publishing quality analysis for more than a decade. Sunshine Profits has been founded by Przemyslaw Radomski, CFA - a renowned precious metals investor and analyst.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules