StrayDog's Weekly Analyses, April 19, 2020

Another week gone, indices advanced, volatility went down. Earnings season starting to kick in, with five large US banks already reported.


Next week, these are the scheduled news and Notable Earnings reports:

Thursday being most important day, with Flash Manufacturing PMIs and Service PMIs, and yet another US Unemployment Claims.


This picture was circulating the social media after market didn't cared for three bad numbers in the row, and made a rally on it:

In the meantime, we had fourth number last Thursday, and market still didn't care much about cumulative job loss of 22 million. What about techicals?


Lets observe the charts and make a conclusion what is going on here, and who is in charge.


Chart #1 - NDX, SPX and RUT Daily with DMAs


Old school DMA50 and DMA200. Here we can observe that 50 never crossed below 200 on Nasdaq 100, which is leading the US markets higher, especially FAANGMAN stocks. Amazon with new All -Time-Highs last week.


Chart #2 - NDX, SPX and RUT 240 min charts with fibs

NDX above 61.8 fib retrace of the entire down move from ATH, SPX closed above halfback, and as we can see on prior chart, above Daily 50, RUT lagging behind big time. Reactions from resistance zones, but dips got bought.


Seasonality - Nasdaq 100 stocks tends to lead into the Earnings, meaning usually going higher toward them, and first out of this group to report is Netflix - on Tuesday.


Chart #3 - Crude Oil, Monthly chart

This is the cumulative contract chart that I have posted before, and price almost tagged the 2001 low of 17.12.


Stock markets advancing despite bad data, bad Earnings reports (so far), without visible improvement of coronavirus cases, with Crude Oil near $17, and with "imminent recession around the corner". So, if you were stubborn about selling stock markets based on fundamentals and headlines, you were most likely got burned so far. You could say now "but market going higher on FED, Central banks intervention, liquidity... "


But let's put aside ALL of those headlines, and let's go back to Chart #2, the Daily chart of US indices. What are we having there exactly, what do you see there? Higher highs, higher lows. It is happening in front of our eyes. Dips being bought, liquidation breaks picked, gap up on Gilead news holding.


Check this chart of ES_F from Friday.


We had bearish divergence into resistance, on daily chart initial reaction from DMA50, but what we got at the end? A good day-trade, and nothing more. So, until we get the BREAKDOWN below that trendline, OR good reaction from 61.8 fib AND lower lows, meaning BREAKDOWN of prior supports - buyers are the ones that are dominant on the SPX / ES_F. Once again - for BIGGER downside than just day trading REACTIONS, sellers need breakdowns. When and IF we get them... THEN we are going to hammer those.


Moving on to German DAX, which is much more two sided market than the big bro SPX.


Chart #4 - DAX Monthly


DAX is moving inside this up sloping channel for more than a decade. Lots of stuff to observe here, that we can see on low timeframes also - AND apply in our short-term trading. Like AXIS line or zone. Highs of 2000 and 2007 and lows from 2014 and 2020 (so far) in the same area.

Low of 2016 as a spring (false breakdown below support). New ATH as a upthrust (false breakout) above former ATH. Price touching former "inner" channel, where that "rail" is, connecting 2014, 2016 and 2018 lows.


On Thursday, April the 16th we had one zone for daytrading that was acting as Axis zone, providing both support and resistance. False breaks as day trading setups we have every other day. Reactions from channels and first test of trendlines.


Let's move down to Daily.


Chart #5 - DAX Daily


After contraction we get expansion, and vice versa. Directional moves comes AFTER maret range for a while. Obvious resistance, and "line in the sand" for German DAX bears is HALFBACK of the down move from ATH. We have here also top of range #1, bottom of huge 400+ gap down (blue rectangle), Daily 50. Price behaviour on DAX was very similar like on SPX - dip buying, and after a Trend Down Day on Wednesday, April 15th, we did not get ANY kind of follow through, since buyers on Thursday defended Wednesday low. On Friday we got "Gilead gap up", and again, buyers defended the top end of that gap up. So, what are the options now? We are trading currently in range #4.


IF price breaks above, we have iminent resistance at 11,025 - mentioned above, and we can expect sellers reaction there. Again: halfback, top of range#1, bottom of gap down, DMA50. IF it is a shallow / weak one, price could go above all of that, and inside the blue rectangle, which is a "fast area", nothing is there. From there, and once inside the big gap down, we could have two scenarios: acceptance or rejection. Price acceptance inside the gap, could lead higher, toward 61.8 fib retrace, rejection would be a false break, a "look above and fail", with price swiftly going back inside range #4 and sellers stepping on the gas.


Bearish scenario without going above halfback would require price failure on top of range #4, OR at halfback, filling the "Gilead gap", breaking upsloping trendline of this possible wedge, and moving inside range #3 for start.


Sticking to charts, on ALL of this indices and instruments will IMO have a positive effect on your trading, since our general bias can cloud our mind, and then we are not able to make good trading decisions. WHO IS IN CHARGE? What is going on RIGHT NOW? Those are the questions that we should ask ourselves. What is the market doing? Answer that to yourself OUT LOUD, during the trading session. Do we have higher highs or lower lows? Who is going to be forced to liquidate? Where are good inflection points? And ALL of that is much more important than any headline out there.

 

In short term trading it is very important to properly understand context heading into every day, to know from which side wind is blowing - who has the short term control, and which side will be forced to liquidate IF and WHEN market hold above or below a certain level. What is the level of volatility, what can we expect from any particular day, what market already done in premarket session, what possible setups can be available, and so on... the things that we constantly learn in the DAILY DOSE OF DAX.


Cheers, StrayDog