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The last two days have been a long awaited (small) victory for the bears. Could the market have topped after been rejected at the 200 EMA?
I will explain why the sell off Thursday and Friday could be the real deal
Fundamental Analysis
1. The Gild/COVID Bounce - For those who have been following my SPY ideas, I have talked about the GILD bounce (Covid therapy) on a number of occasion and how the market would react to it and my last idea titled "another Covid Optimism Bounce" showed where I expected the bounce would end.
2 While the market was selling off Friday it was announced that the Gild drug had been approved for emergency use but the market shrugged the news off and sold off anyway.
3. That was a bad sign for the markets that GILD or any positive Covid news did not affect the market in a positive way as it has in the last few weeks. (Getting a vaccine would be a different case).
4. The tariff talk, sell in may (and go on vacation (non this year due to covid) ), the end of the earning season for the major tech companies could also have caused the market to start selling off. Due in part because the US did not fully shutdown the economy until march, which meant most companies were still able to meet of beat on earnings. This could have been a part( as well as the Covid optimisms ) of the market rally we had since march.
5.The question remains, what happens to the next earnings? IMO not as good.
6. The Buffet indicator which is used by some to value the market reads with a ratio = 132.3%, Significantly Overvalued as of 05/02/2020.
7. Shiller PE Ratio: 26.50 which is about where we were in 2008.
8. The retail (Brick and mortar) bankruptcies have yet to begin and even amazon is having to invest all its profit back into the market.
9. None of this sound like we should be in a bullish market except that the fed is pumping trillions into the market.
Technical Analysis
1. The bears where looking at trendline (t1) for a break below to enter a short position but the market kept on heading higher
2. The bulls claimed t2 should be the trendline used but has now been broken after reaching the 200ema.
3. The question now, are we going to consolidate side ways before the next move up? In my opinion if we continue to consolidate sideways we could start to move higher but if we gap down below T3 on Monday the bears are in control
4. I have placed many support and resistance lines in the chart to look for. When we go below a support line, it now turns into a resistance and VSV.
5. Volume had been slowing for a while now, (which isn't that bad in of it self) but I noticed in the last 3 days (and two sell off days) volume is starting to pick up again. This is part of the ABC reversal where volume increases in Wave A, declines on wave B and increases again on Wave C as selling picks up.
6. Looking at the RSI we are heading towards a support level which acted as a resistance on our way up, then acted as a support recently. if we break it to the down side then all options are open.
7. lastly On a weekly chart, we have a shooting star which seem to appear at the end of an uptrend.
Last but not least the fed is pumping a shipload of money into the market but in my opinion, the big boys are selling as the market kept going higher (its the way they get their own stimulus check) and we can see that when looking at the macd for the week and monthly. Especially in the month of April which was all green on the daily is light red on weekly and increasing red on monthly.
Even Buffet increased his cash balance with about 9.2 billion from last year to a now total of 137 billion. If he isn't buying then why should I buy or any retailer?
I leave with this question someone asked: if you had been asleep for the last three months and after you woke up where told of the global shutdown and COVID Cases. You are then asked to predict how many points you would expect the market would be down?
In my opinion, I would only be comfortable to enter the market at whatever answer I give.
Please do your due diligence and invest wisely.
The last two days have been a long awaited (small) victory for the bears. Could the market have topped after been rejected at the 200 EMA?
I will explain why the sell off Thursday and Friday could be the real deal
Fundamental Analysis
1. The Gild/COVID Bounce - For those who have been following my SPY ideas, I have talked about the GILD bounce (Covid therapy) on a number of occasion and how the market would react to it and my last idea titled "another Covid Optimism Bounce" showed where I expected the bounce would end.
2 While the market was selling off Friday it was announced that the Gild drug had been approved for emergency use but the market shrugged the news off and sold off anyway.
3. That was a bad sign for the markets that GILD or any positive Covid news did not affect the market in a positive way as it has in the last few weeks. (Getting a vaccine would be a different case).
4. The tariff talk, sell in may (and go on vacation (non this year due to covid) ), the end of the earning season for the major tech companies could also have caused the market to start selling off. Due in part because the US did not fully shutdown the economy until march, which meant most companies were still able to meet of beat on earnings. This could have been a part( as well as the Covid optimisms ) of the market rally we had since march.
5.The question remains, what happens to the next earnings? IMO not as good.
6. The Buffet indicator which is used by some to value the market reads with a ratio = 132.3%, Significantly Overvalued as of 05/02/2020.
7. Shiller PE Ratio: 26.50 which is about where we were in 2008.
8. The retail (Brick and mortar) bankruptcies have yet to begin and even amazon is having to invest all its profit back into the market.
9. None of this sound like we should be in a bullish market except that the fed is pumping trillions into the market.
Technical Analysis
1. The bears where looking at trendline (t1) for a break below to enter a short position but the market kept on heading higher
2. The bulls claimed t2 should be the trendline used but has now been broken after reaching the 200ema.
3. The question now, are we going to consolidate side ways before the next move up? In my opinion if we continue to consolidate sideways we could start to move higher but if we gap down below T3 on Monday the bears are in control
4. I have placed many support and resistance lines in the chart to look for. When we go below a support line, it now turns into a resistance and VSV.
5. Volume had been slowing for a while now, (which isn't that bad in of it self) but I noticed in the last 3 days (and two sell off days) volume is starting to pick up again. This is part of the ABC reversal where volume increases in Wave A, declines on wave B and increases again on Wave C as selling picks up.
6. Looking at the RSI we are heading towards a support level which acted as a resistance on our way up, then acted as a support recently. if we break it to the down side then all options are open.
7. lastly On a weekly chart, we have a shooting star which seem to appear at the end of an uptrend.
Last but not least the fed is pumping a shipload of money into the market but in my opinion, the big boys are selling as the market kept going higher (its the way they get their own stimulus check) and we can see that when looking at the macd for the week and monthly. Especially in the month of April which was all green on the daily is light red on weekly and increasing red on monthly.
Even Buffet increased his cash balance with about 9.2 billion from last year to a now total of 137 billion. If he isn't buying then why should I buy or any retailer?
I leave with this question someone asked: if you had been asleep for the last three months and after you woke up where told of the global shutdown and COVID Cases. You are then asked to predict how many points you would expect the market would be down?
In my opinion, I would only be comfortable to enter the market at whatever answer I give.
Please do your due diligence and invest wisely.
Trade active:
J.Crew just filed for bankruptcy protection. This will be the start of more to come.
Trade active:
Last weeks support is now acting as resistance so far today