MARKETS UPDATE (3:30 pm EDST)
"CRASH" UPDATE
The Fed's massive full point interest rate cut announced Sunday night seemed to have the opposite effect of its intent to stabilize equity markets. The broad stock market experienced a record-breaking plunge on Monday with the DOW losing over 3000 points. It seems the timing of this announcement was bad as most were expecting a rate cut to be announced after this week's FOMC meeting (now cancelled), which is normal Fed protocol. The "emergency" announcement of a full point cut on Sunday apparently alarmed many traders and investors (already spooked by the ongoing coronavirus crisis) and triggered the massive sell-off on Monday, Markets are more stable today, calmed by the White House backing a 850 billion Federal stimulus plan and a mid-day press briefing from the White House outlining a coronavirus bill to be passed around the middle of this week to help financially stressed Americans dealing with the effects of this epidemic. The DOW is up 800 points at the moment (3:30 pm EDST).
So far, the general support levels I mentioned in last Thursday's blog (20,000 in the DOW and 2,300 in the S&P 500) are holding. We could see a rebound from here; however, all three indices (DOW, S&P 500, NASDAQ) made new lows yesterday (i.e. no intermarket bullish divergence this week). We generally like to see bullish divergence at a significant low. Also, yesterday's lows did not happen in a reversal zone, but we are entering another strong one later this week (March 20 - April 6). I would prefer to see a significant low in that time frame. Let's wait and see how this market moves into Friday. Still on the sidelines of the broad stock market for now.
I should mention here that any significant rally in equities at this point will most likely not make new all-time highs. I had previously thought that a strong rally into the summer or early fall would lead to new all-time highs (and possibly a "blow-off" top) before a very strong downturn and severe correction. That seems very unlikely now. If the Fed and the Trump Administration's stimulus efforts do turn this market around temporarily, we could get some significant rallies into the summer. But, again, these rallies (or rally) will likely not make new highs and will reverse and eventually lead to lows even lower than what we've seen so far (possibly a lot lower). With this in mind, we should be on the lookout for opportunities to sell short. There may also be opportunities to buy at cycle or sub-cycle bottoms, but these will likely be shorter-term trades.
Crude oil is making a new low today ($26.71 - April contract chart), which may not bode well for the broad stock market. Gold and silver prices are bouncing a bit off yesterday's new lows. We may see some rallying here, but I am inclined to think prices will move lower into our next reversal zone (March 20 - April 6). Let's stay on the sidelines of all these commodities.
"CRASH" UPDATE
The Fed's massive full point interest rate cut announced Sunday night seemed to have the opposite effect of its intent to stabilize equity markets. The broad stock market experienced a record-breaking plunge on Monday with the DOW losing over 3000 points. It seems the timing of this announcement was bad as most were expecting a rate cut to be announced after this week's FOMC meeting (now cancelled), which is normal Fed protocol. The "emergency" announcement of a full point cut on Sunday apparently alarmed many traders and investors (already spooked by the ongoing coronavirus crisis) and triggered the massive sell-off on Monday, Markets are more stable today, calmed by the White House backing a 850 billion Federal stimulus plan and a mid-day press briefing from the White House outlining a coronavirus bill to be passed around the middle of this week to help financially stressed Americans dealing with the effects of this epidemic. The DOW is up 800 points at the moment (3:30 pm EDST).
So far, the general support levels I mentioned in last Thursday's blog (20,000 in the DOW and 2,300 in the S&P 500) are holding. We could see a rebound from here; however, all three indices (DOW, S&P 500, NASDAQ) made new lows yesterday (i.e. no intermarket bullish divergence this week). We generally like to see bullish divergence at a significant low. Also, yesterday's lows did not happen in a reversal zone, but we are entering another strong one later this week (March 20 - April 6). I would prefer to see a significant low in that time frame. Let's wait and see how this market moves into Friday. Still on the sidelines of the broad stock market for now.
I should mention here that any significant rally in equities at this point will most likely not make new all-time highs. I had previously thought that a strong rally into the summer or early fall would lead to new all-time highs (and possibly a "blow-off" top) before a very strong downturn and severe correction. That seems very unlikely now. If the Fed and the Trump Administration's stimulus efforts do turn this market around temporarily, we could get some significant rallies into the summer. But, again, these rallies (or rally) will likely not make new highs and will reverse and eventually lead to lows even lower than what we've seen so far (possibly a lot lower). With this in mind, we should be on the lookout for opportunities to sell short. There may also be opportunities to buy at cycle or sub-cycle bottoms, but these will likely be shorter-term trades.
Crude oil is making a new low today ($26.71 - April contract chart), which may not bode well for the broad stock market. Gold and silver prices are bouncing a bit off yesterday's new lows. We may see some rallying here, but I am inclined to think prices will move lower into our next reversal zone (March 20 - April 6). Let's stay on the sidelines of all these commodities.
RSS Feed