StrayDog's Weekly Analyses, March 15, 2020

Previous week started with the Black Swan Event - with Crude Oil down 30%. On Thursday, we got the worse day ever on European markets. Stock indices in Bear market territory.


Scheduled events next week:

Markets expecting another rate cut from FED, so event of the week will be Federal Funds Rate and FOMC Press Conference at Wednesday. Reminder: Due to the US Daylight Saving Shift, two more weeks we will have US open at 14:30 CET (instead of 15:30 CET)


Chart #1 - Crude Oil Monthly


Zoomed part is from Daily chart. Question - will this gap be filled, or not, and what will happen IF it would be filled? Check the 2016 low, as well as low from 2001.


Chart #2 - SPX Monthly

Due to the size of the drop, IMO we must observe indices on Monthly and Weekly charts also. December low is 30.8% from the ATH, and the question is - Will market make its way above that, or stay below. Poking above is not the same as HOLDING above.


Chart #3 - Second SPX Monthly chart - trendlines


Observe two trendlines, one from 2009 low - primary trend, and second from 2011 low - secondary trendline. Bounce as first test of secondary trendline. Below 2715 we have PA from 2017 - no good supports there, and then 2 yrs trading range, roughly 1800-2130. Entire "Trump rally" from the election of US president Trump, could be in danger.


You can now look at the put/call ratio, at the Fear/Greed index... at oversold readings and DeMark indicator (for example) but none of that will matter IF there are more over leveraged investors with bad positions that could receive margin call next week. We are witnessing panic and emotional selling. Is that low from Friday IT or NOT? That is the question, and there certainly is room to go down more.


Charts I like:

ES_F chart

from Chris (@stoffengg)


SPX / ES_F fib extension

from Marc Eckelberry (@AheadoftheNews)


1987 bottoming process

from Walter Deemer (@WalterDeemer)


Chart #4 - VIX Weekly

There was some bottom calling around VIX 55, but nevertheless it went to 77+.

Calling bottoms is somewhat easier than calling tops, but it is not easy, and we need evidence of strength. Until that, just a lack of strength will be enough for sellers to sell rips. Likely more volatile days ahead of us.


Chart #5 - NDX Monthly


Nasdaq 100 is much more higher from Dec 2018 low then SPX, showing relative strength. Also, much above its primary trend from 2009 low - in fact so much above it, that even a HALFBACK from 2009 lows to ATH would be around that trendline. Room to go.


Chart #6 - RUT Monthly

Small cap index Russell 2000, the one that is not confirming the rally for the two years already, and with the lower low. Also, below both trendlines, from 2009 and 2011 lows. Leader to the downside, and a warning also. Take a look where is was just a week ago, check Weekly Analyses for previous week.


Chart #7 - XJO Weekly (Australian ASX 200)


Another example how things can escalate quickly, and how "Bulls go up with the stairs, while bears jump out of the window". Can it move above 5410 or stay below?


Chart #8 - German DAX Monthly


Futures bounced from 8815 on Friday. Closest LTF Support is 8700, which is 36.9% from ATH. Below that, we have wide area of Support, 8150-8400. That is highs from 2000 and 2007, and low from 2014. Level 8151, high from 2007, is 41% from the ATH.


Chart #9 - German DAX Daily


There are three large gaps above the current price. As long as it is below 10,280 (Dec 2018 low) - DAX is negative and bias is bearish.


Final thoughts


About markets: There is more room to go to the downside. Next week will be a good tell, are we getting a bounce or not. IG Market Weekend quotes show Dow Jones down 900 points (Sunday, 5 pm CET). This is challenging time to trade, since even market veterans haven't seen this volatility. I am trading 15+ years, and this will be a good experience for all of us.


Predetermined zones of DAILY DOSE OF DAX:


DAX 5 min chart with DAILY DOSE OF DAX zones, for Tuesday, Mar 10 - at the end of the day



GENERAL: Think how China managed to stop the coronavirus spread, and to close the last temporary hospital in Wuhan? How they had 15 new cases on the weekly level last week, vs. 15,000 in a single day, on the peak of outbreak. Show some discipline, and instead of buying weapons and ammo (in USA - maybe too much watching of "The Walking Dead" ???), and protesting of lockdown (Paris - and ideal situation for spreading the virus), just follow instructions AND SIT AT HOME. Forget about your own rights and liberties for a while, for the benefit of all. Be responsible, since that childish behaviour like "I don't care for this, I am American/French/German/Serbian/whatever so I can do what I want" is not helping at the moment.

 

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