Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will Stocks Keep Cutting Through Supports Like a Hot Knife Through Butter?

Stock-Markets / Stock Markets 2020 Mar 02, 2020 - 06:52 PM GMT

By: P_Radomski_CFA

Stock-Markets

During the first half of yesterday’s session, the bulls were in the driving seat after repelling sellers at the open. Yet again, their gains have evaporated, and stocks not only broke to new lows, but also closed there. Will today’s session be any different?

With the sizable daily volatility, it’s well worth checking the downswing on the weekly chart (charts courtesy of http://stockcharts.com).


Yesterday’s plunge took prices all the way down to the lower border of the rising black trend channel, and then some. The breakdown hasn’t been confirmed yet, but unless the bulls really show up today, prices will close the week below the channel. And frankly, we don’t expect them to.

Our yesterday’s observations ring as true today as they did throughout the week:

(…) 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.

How does yesterday’s session look on the daily chart?

Another day, another bearish gap. The opening bell was met with heavy selling, which took stocks right through the upper orange support, reaching 3006. The bulls stepped in and midway into the session, it appeared that the breakdown attempt would be invalidated. But as the closing bell draw nearer, the bears kept driving prices back through the orange support, forcing a close well below it.

Our subscribers have been ready, and we captured more than 95 points of the slide.

And what about today?

The bulls are attempting to lift prices in the premarket trading. Yet, they have reached only 2950 so far. Not a really convincing show of strength. It looks like we’re in for yet another dead-cat bounce.

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

In yesterday’s Alert, we have commented extensively on the evolving coronavirus situation the ground. The only thing to add today, is to pinpoint the likely catalyst – the first US case without any ties to China. Now, we’ll expand the below assessment along the economic lines:

(…) 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 makes sense to strike an optimistic tone when addressing the crisis. It’s about managing expectations and softening the blow the virus is making on economic activity and consumer perceptions. The toll is heavy already, and likely to get worse before it gets better again.

Some places are attempting to counter the economic impact. Hong Kong has announced cash handouts and tax relief to its residents in a confidence boost attempt. The bets on Fed taking action have sharply increased – will the rate cut come as early as March?

Let’s check now how the risk-off trade has been doing since we showed you the US Treasuries and Japanese yen charts yesterday. Is it still hotly pursued as our yesterday’s comments have indicated?

Let’s start with US Treasuries – the 30-year bond yield has been plunging to new lows. When its yield goes down, it indicated that the demand for safety of US Treasuries is overwhelming the supply. Whenever yield plunges without end in sight, it indicates stress in the system. Little surprise that stocks are taking it on the chin. See for yourself the below chart.

Next, let’s examine the key move underway in the Japanese yen. This safe-haven currency also points to the rising risk-off trade appeal:

The awaited breakdown below the declining black trend line came already yesterday, and the daily indicators continue favoring more downside. Looking at today’s action so far, the rising red trend line has already been broken as the pair trades at around 108.65 currently. Will the 200-day moving average provide an excuse for the bulls to step in?

Both of these charts confirm the downside move in stocks and hint at more to come.

But where is the next support located? The daily chart shows that the lower orange support just below 2850 could be next in line. But is the momentum as strong so as to reach these August and October 2019 lows?

As the S&P 500 futures change hands at around 2925 currently, it appears likely that the bears will show up in force today as well. After all, they annihilated yesterday’s 90 point rally within a few short hours. It’s not unthinkable they’ll repeat the same feat today should another relief rally arrive.

Let’s quote our Wednesday’s comments:

(…) Unless we see response on par with the People’s Bank of China interventions, which would radically change the game, S&P 500 rallies should be viewed with a hefty dose of skepticism.

Therefore, we’ve opened a short position earlier today, and our subscribers had the trade position details first – and good news, we cashed in on quite a part of today’s slide since the open.

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’re managing our open trades accordingly. Currently, we’re on a lookout for the next favorable setup to emerge.

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