StrayDog's Weekly Analyses, April 5, 2020

Previous week: ranging PA and lower volatility. New record US Unemployment Claims, and yet, markets did not go lower. A thing to carry forward.


Next week will be shortened trading week, with following scheduled data releases:

Crude Oil had a huge up move on Friday, news driven move, so OPEC Meetings and rumours around it will have a great impact on this commodity. FOMC Meeting Minutes and ECB Monetary Policy Meeting Accounts are coming WITHOUT Press Conferences, making them the less important version of this events, and they can be in the shadow of yet another US Unemployment Claims, on Thursday.


Due to the Easter holiday, Eurex and Xetra will be closed on April 10th and on Monday, Apr 13th as well. US markets will be closed on Friday, April 10th.


Chart #1 - SPX Monthly

March is over, so we can take a look now on Monthly close, and bigger picture on SPX, and the same goes for German DAX.


Chart #2 - DAX Monthly


We can observe big tails on March candles, on both. Bigger look for lower levels of support, in case we need them.


Chart #3 - VIX Weekly

Due to a nondirectional movement - balancing in the range, volatility contracted, and this is something to observe as well. Further contraction, OR expansion.


Chart #4 - SPX and DAX Daily, cash index gaps


Chart #5 - SPX, NDX, DAX Daily - Fibs and ranges


Using the Charts #4 and #5 - we can observe the following:

> PA on all of the indices is below 38.2 fib retrace of the down move from ATH

> price is in the range

> last three days of previous week is a 3-day balance

> gaps can be targets, and to observe price acceptance or rejection from S/R levels


What can happen next, short-term? Price can be in the balance for more time, it can make false breaks up and down, targeting opposite end of the range, OR make a decisive break up or down of this 3-day balance. Our short term trades are there.


Bigger picture - nothing has changed since last week blog.


From previous Weekly Analyses:

IMPORTANT: Nobody knows where market is heading next. We can make scenarios and trade them as they develop. Scenario #1 - markets failed in front of resistance, and rolling down has started. Scenario #2 - markets will make an upthrust (false breakout) of resistance above (For SPX 2715-2750, for DAX area around 10400) and then swiftly move lower. Scenario #3 - markets making a breakout, heading toward halfback or other resistance of the entire down move from ATHs None of this scenarios is not including the possibility of bottoming process mentioned above, since "V" reversals in Bear markets are very rare. We got a "V" reversal on Dec 2018 low, and that is an outlier, AND SPX spend a day in the -20% territory, so was not in the real Bear market. Note that stimulus was given on GFC 2008 also, but it took some time for that to kick in.

 

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