Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
WESTERN DIGITAL WDC Stock Trend Analysis - CHIA! - Risk 1 - 23rd Jun 21
AMC Is the Best-Performing Stock in America: Don’t Buy It - 23rd Jun 21
Stock Market Calling the Fed‘s Bluff - 23rd Jun 21
Could Bitcoin Price CRASH Target A Bottom Below $7500? - 23rd Jun 21
Bitcoin and cryptos: Your 'long-term investment'? - 23rd Jun 21
Unlocking The Next Stage Of The Hydrogen Boom - 23rd Jun 21
USDT Ponzi Scheme FINAL WARNING To EXIT Before Tether Collapses Crypto Exchange Markets - 22nd Jun 21
Stock Market Correction Starting - 22nd Jun 21
This Green SuperFuel Could Change Everything For the $14 Trillion Shipping Industry - 22nd Jun 21
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Correction or Reversal? The Jury Isn't Out!

Stock-Markets / Stock Markets 2020 Sep 11, 2020 - 05:27 PM GMT

By: Paul_Rejczak

Stock-Markets

The bears retook initiative yesterday, twisting the hands of weak longs. Where is the usual buy the dip mentality, and all the complacency that is part and parcel of bull markets? It's not just stocks that are at autumn crossroads, and attract extensive comments and discussions (thank you all the commenters!).

If you didn't know, I'm active and present throughout the day at investing.com (just enter my name into the search box there, and it'll offer me as the author – select an article, and check out what you're missing) , one of the sites where free versions of Stock Trading Alerts are featured daily. I'm there, interacting with my audience (just as with my subscribers whenever they send me a comment or question via Sunshine Profits – thanks for that!) – I am discussing this topic today given the key juncture stocks are at.

These comments are so important that they can't go into the From the Readers' Mailbag section. Instead, I'm featuring them (marked as C) before the technical part of today's analysis.

Here are a few quotes in response to yesterday's "Correction Or Reversal? Cast Your Votes" article.


Market-Related Comments

C: Correction, reversal comes closer to elections. It just feels like a 3 day bleed!

A:  I'm still of the opinion that it's a sharp short-term correction, that the bull remains intact, that this is not a reversal. It's a sharp correction to scare the bulls out, and will bring in fresh blood to the bull run before October uncertainties strike in earnest. Media are talking prospects of a contested election, possibility of a Trump landslide before, you know, all those mail-in ballots come in trickling… Given what we have seen as regards rioting so far, having a clear winner right away would be the best present for the country and its stock market.

C: 3307 sp cash will be the target zone. but if cash gets below 3280 then probably 3206-3050 may be seen.

A: I agree with your assessment, but see those figures as applying not to cash, but to futures. And indeed, we saw the daily chart's 50-day moving average (3305) hold in the overnight trading.

C: AU showed the same institutional buying pattern as well on Friday. Considering the extent of this correction, I will say this is our last up before heading into the real correction starting early October. We have also not seen the Institutional liquidity swap usually seen on a trend reversal either. Further strengthening a last bull run. Patience is definitely a virtue to get the most profit out of this great opportunity.

A: Exactly, the advance-decline line behavior on Friday revealed accumulation. This was a sharp selloff as tech momentarily collapsed under its own weight. I agree that the table is set for stocks to recover.

C: The bottom of the Bollinger Bands is 330. A break below that would bring 320 into play; and in the most extreme case, 300. While 300 would arguably invalidate Monica's thesis, I think a bounce off 320 could still leave the bull intact if there is follow-through. Support is strong there and even stronger at 300, though if we reach the latter I might suggest reevaluating where things could head in the coming months.

A: These SPY values are quite in tune with where I have drawn the line for the new stock upleg hypothesis. Look at yesterday's SPY volume drying up – I think we have seen the local low. The most probable scenario remains a renewed upswing before the real October storms arrive.

C: You were mistaken Monica however. You said such a sharp correction will not come before October. And here we are. From the way it looks, this could be a reversal.

A: I called for a rather shallow correction in September, and this is what we got right at the start of the month instead. Higher volatility is here, and earlier than I thought judging by the 2016 precedent. That doesn't take away from the very real possibility of seeing a similarly sharp (or sharper) downside move in October.

The point is to be adaptive in adjusting one's views, to account for new realities. The great strategist, Helmuth von Moltke the Elder said that “No plan survives contact with the enemy.” Very true, and applicable to trading as well.

The key takeaways are that thus far, the bull run is alive and well, that we have seen a correction and not a reversal, and that the worst of the downside is in all likelihood in the rear view mirror.

Corona-Related Comments

Yes, they belong to the stock market analysis given the tremendous importance of keeping the economy open for business, job market, consumer confidence, retail sales, you name it. The economy doesn't exist in a vacuum and needs a healthy society, not one cowering in fear while Rome burns.

C: I am a Professor of Medical Genetics.   Professor Lipsitch a Harvard epidemiologist documented that with in the coming year, some 40 to 70 percent of people around the world will be infected with the virus The emerging consensus among epidemiologists is that the most likely outcome of this outbreak is a new seasonal disease. The problem is that compared to the FLU mortality 0.1% COVID has 3-20% mortality dependent on age. It is rapidly mutating and each year ,like with the flu, a new vaccine will be needed. It is a new disease that ultimately result in the evolutionary outcome of survival of the fittest, and combined with the Flu mortality rates are still to be grasped The world and world economy will never be the same  any time soon. Hedge fund CEO and short term speculators Just don't understand the writing on the wall-this is a health crisis not a monetary one as before.

A: I've been extensively writing on corona. People, check my articles such as July 20 - S&P 500 Is Knocking on the Doors of Early June Highs , Aug 20 - S&P 500 Downswing Staring Us in the Face? , and July 09 - The Renewed S&P 500 Upswing Is Coming . That's just a few. I am no fan of Neil Fergusson style fearmongering.

Those mortality figures are laughably inflated. Even the CDC said there were more suicides than corona deaths. The CDC’s own report says less than 10,000 people have died exclusively from the coronavirus.

I don't buy professor's scaremongering of 60 million already infected as measured by very false positive prone PCR tests. Who measures viral load actually? That's (capability to infect) what should be considered instead. I expect powerful fear from the media over weeks and months to come - after all, they've been hinting at a Dark Winter for a long time. The impact on weakened immunity systems will be keenly felt, deaths will rise, but I still look at it to be adequate to a really bad flu season. Hint: if we were in a plague, there would not be that much debate around that. See how powerful actors are reshaping the narrative into a climate change agenda societal reset and away from liberty and capitalism.

Reason is what matters the most. Hospitals aren't overflowing, ventilators are in oversupply etc. Talking doctors, I suggest you search for America's Frontline Doctors - they have the solutions! Turn for real, pioneering medical inspiration to Dr. Didier Raoult, Dr. Stella Immanuel, Dr. Cameron Kyle-Sidell, or Dr. Alex Hakim. Even the CDC director has said there have been more suicides than death by corona.

C: Let's not forget CDC quietly updated their mortality figures and only 6% of total "Covid" deaths are from Covid alone. 9210 people. Hate the fear mongering that took over our country

A: I absolutely agree with you. You are rightly pointing at the same CDC methodical revamp as I were in the above post. I have been also pounding the same message: United States can't succumb to blind fear, the most primitive of emotions!

S&P 500 in the Short-Run

I’ll start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

A perfectly bearish chart at first glance, and the caption just asks what else could the bears wish for? The 50-day moving average is near, and I doubt that the sellers would be able to take prices there right now. In October, that would be another story for another day.

My Friday's thoughts on the upswing attempt are still valid today:

(…) the bulls will have to prove that it wouldn't turn out as a dead cat bounce.

The Credit Markets’ Point of View

Yes, high yield corporate bonds (HYG ETF) declined, but not before putting up a fight first (please see this and many more charts at my home site). And I think the upper knot highlights the very real possibility that a local bottom has been reached yesterday. Sign of accumulation.

The caption says it all. Relative to the high yield corporate bonds to short-term Treasuries (HYG:SHY) ratio's daily performance, stocks are at short-term rock bottom comparative valuations. They don't seem to have much more room to decline vis-à-vis the key credit market ratio (unless the latter takes a dive, that is – but I don't see that as probable).

Treasuries, Gold and the Dollar

Long-dated Treasuries (TLT ETF) are not on an upswing. Quite to the contrary, they've been going rather sideways recently, which mirrors the economic recovery story (rising yields are in favor of it), and the increased inflation expectations also help drive yields down.

The key point is that there is no stampede into these debt safe haven instruments.

The liquidity squeeze indicator, the king of metals, is holding up pretty well. No, gold is not facing a margin call, and I view its latest candle as a sign of accumulation during the still bullish shape of the consolidation that I talked yesterday:

(…) it's my opinion that (gold) would attempt to extend the early summer gains once the floor in the U.S. dollar probes lower values again. This might take time though, as I look for USDX to spike higher first – quite a few bullish divergences have formed there, and will likely play out over the coming weeks.

And indeed, these divergences are getting resolved with greenback's upswing. Just as it has helped take oil ($WTIC) to the cleaners, other risk-on assets are suffering too. But if the dollar were serious about its rebound (i.e. it would have serious legs), Treasuries and various yield spreads would be rising alongside, which I don't see happening right now.

The dollar putting up an appearance of a fight, is the Occam's razor style, simplest logical conclusion for the coming weeks. Unless the Democrats raise up a notch their existing calls for Biden not to concede defeat under any circumstances, unless rioting ramps up, unless the Fed takes away the punch bowl, and finally unless Americans happily march into another lockdown that who knows when it would really end and on what terms (Cuomo's conditions serve as a great, sorry, terrible example), the stock bull run can go on in September before meeting the October headwinds.

Summary

Summing up, today's article is well worth the read in its entirety, but suffice to say that the bulls have the opportunity to retake initiative, and prove that this correction is over in terms of prices at least. With rejuvenated spirits, they can recover from the setback suffered, and push somewhat higher before elections start to bite.

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