Stock Market Analysis - 4/1/2020
Markets have shown us what direction it wants to go and the direction is down. Since the last analysis, markets were continuing an impressive but overextended bounce. The markets continued this action on Monday and through mid Tuesday. By late Tuesday, there were some big red flags that markets were cracking and this recent bounce may be over.
On the SPY I have been calling out the 260 area as a key level of resistance to watch. On Monday I had expected SPY to pullback to the 5DMA however what we got instead was a continuation move right below 260. Tuesday was a continuation of Monday's move, however SPY cracked when price fell below 260, retested it, and then closed LOD. Notice where we rejected; price rejected off a declining 20DMA, a clear signal that the longer term bear trend is still valid. This was actually an excellent area to get short after the 20DMA reject on Tuesday. For tomorrow, I expect SPY to continue this short term downtrend, however I will be watching the 237 level closely for support.
The action on QQQ is a reflection of SPY however QQQ suffered a little less pain in terms of downside. I'll be watching the 178 area as a level of support. Again, I won't go over IWM and DIA since the price action is pretty much the same as SPY. IWM did suffer the worst pain with a -6.81% drawdown.
VIX is probably the most interesting case study for today. Despite the impressive downside we experienced today, VIX did not react as severely as it did in the past. It seems as though volatility has already reached a peak - a good bullish sign. However, VIX is currently consolidating and could just be building up energy for a more powerful move in the near future. Tread carefully.
Overall, the short term trend is currently bearish. If you are bullish, I would not try to fight this trend till we see clear signs of bottoming. We are not guaranteed to see a retest of the lows however I would definitely not want to be long right now. Short trades can be taken however with tight stops and quick profit taking. Yesterday and today were perfect days to initiate a short trade (See my AMD short on 3/31/2020).
On the SPY I have been calling out the 260 area as a key level of resistance to watch. On Monday I had expected SPY to pullback to the 5DMA however what we got instead was a continuation move right below 260. Tuesday was a continuation of Monday's move, however SPY cracked when price fell below 260, retested it, and then closed LOD. Notice where we rejected; price rejected off a declining 20DMA, a clear signal that the longer term bear trend is still valid. This was actually an excellent area to get short after the 20DMA reject on Tuesday. For tomorrow, I expect SPY to continue this short term downtrend, however I will be watching the 237 level closely for support.
The action on QQQ is a reflection of SPY however QQQ suffered a little less pain in terms of downside. I'll be watching the 178 area as a level of support. Again, I won't go over IWM and DIA since the price action is pretty much the same as SPY. IWM did suffer the worst pain with a -6.81% drawdown.
VIX is probably the most interesting case study for today. Despite the impressive downside we experienced today, VIX did not react as severely as it did in the past. It seems as though volatility has already reached a peak - a good bullish sign. However, VIX is currently consolidating and could just be building up energy for a more powerful move in the near future. Tread carefully.
Overall, the short term trend is currently bearish. If you are bullish, I would not try to fight this trend till we see clear signs of bottoming. We are not guaranteed to see a retest of the lows however I would definitely not want to be long right now. Short trades can be taken however with tight stops and quick profit taking. Yesterday and today were perfect days to initiate a short trade (See my AMD short on 3/31/2020).
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