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Should You Be Concerned About The Stock Market Big Downside Rotation?

Stock-Markets / Stock Markets 2020 Sep 09, 2020 - 01:04 PM GMT

By: Chris_Vermeulen

Stock-Markets

RESEARCH HIGHLIGHTS:

  • Don’t panic.  Technical Analysis does not confirm a deeper price correction at this time, nor does this appear to be the Bull-Trap we have been warning about… yet.
  • We are waiting until next week to see if price confirms any new trend.
  • Volatility should decrease if this is just a moderate price rotation.

Is this the “Bull-Trap” setup we have been warning about for some time now?  Should traders be concerned about deeper downside price trends or a collapse in the markets?


We believe this current downside price rotation is just a well deserved (and somewhat overdue) price rotation related to the recent advance in stock valuations.  Currently, the VIX is moving lower and the volume in the markets is suggesting the deepest part of this price move may be over (for now).  Bonds are moving lower while precious metals are moderately higher.  We don’t believe this current downside price move has any more momentum left – at least headed into the long holiday weekend.

This Daily INDU chart below highlights two key price levels that are acting as support right now, the 27,525 and 26,000 levels.  This recent downside price rotation stalled very close to the 27,525 level and began to rally from those lows. 

The following VIX chart highlights the recent peak in volatility levels, near 38, and also shows how quickly the momentum shifted back towards “recovery” from these lows. I am adopting a “wait and see” stance to see how things progress next week or two.  The one thing we can state with a degree of certainty is that volatility has nearly doubled and risks have increased in the markets – yet we don’t have any technical confirmation the Bull-Trap has been sprung (yet).

We are still urging traders to protect active long positions from potential risks as we will have to wait to see what happens early next week and beyond to see if the bullish trend resumes dominating the market bias going forward.  The VIX had spiked to levels above 36 over the past – nearly doubling from the recent low price levels.  If there is any new risk in the markets over the days or weeks then this high volatility will continue.

We’ll post more research on Sunday, September 6, 2020.  In the meantime, watch for price levels to attempt to stabilize near 28,540 on the INDU (which is another key support level).  This is just a moderate downside price rotation at this stage of the game.  No new technical triggers have confirmed a broader, deeper technical trend.

 Isn’t it time you learned how I can help you better understand technical analysis as well as find and execute better trades?  If you look back at past research, you will see that my incredible team and our proprietary technical analysis tools have shown you what to from the markets in the future.  Do you want to learn how to profit from these expected huge moves?  If so, sign up for my Active ETF Swing Trade Signals today!

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Chris Vermeulen
www.TheTechnicalTraders.com

Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and is the author of the book: 7 Steps to Win With Logic

Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better.

His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility.

He is a regular speaker on HoweStreet.com, and the FinancialSurvivorNetwork radio shows. Chris was also featured on the cover of AmalgaTrader Magazine, and contributes articles to several leading financial hubs like MarketOracle.co.uk

Disclaimer: Nothing in this report should be construed as a solicitation to buy or sell any securities mentioned. Technical Traders Ltd., its owners and the author of this report are not registered broker-dealers or financial advisors. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. Never make an investment based solely on what you read in an online or printed report, including this report, especially if the investment involves a small, thinly-traded company that isn’t well known. Technical Traders Ltd. and the author of this report has been paid by Cardiff Energy Corp. In addition, the author owns shares of Cardiff Energy Corp. and would also benefit from volume and price appreciation of its stock. The information provided here within should not be construed as a financial analysis but rather as an advertisement. The author’s views and opinions regarding the companies featured in reports are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. Technical Traders Ltd. and the author of this report do not guarantee the accuracy, completeness, or usefulness of any content of this report, nor its fitness for any particular purpose. Lastly, the author does not guarantee that any of the companies mentioned in the reports will perform as expected, and any comparisons made to other companies may not be valid or come into effect.

Chris Vermeulen Archive

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