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Welcome and thank you for visiting!

The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
* Major World Market Indices * Futures Markets * U.S. Sectors and ETFs * Commodities * U.S. Bonds * Forex

N.B.
* The content in my articles is time-sensitive. Each one shows the date and time (New York ET) that I publish them. By the time you read them, market conditions may be quite different than that which is described in my posts, and upon which my analyses are based at that time.
* My posts are also re-published by several other websites and I have no control as to when their editors do so, or for the accuracy in their editing and reproduction of my content.
* In answer to this often-asked question, please be advised that I do not post articles from other writers on my site.
* From time to time, I will add updated market information and charts to some of my articles, so it's worth checking back here occasionally for the latest analyses.

DISCLAIMER: All the information contained within my posts are my opinions only and none of it may be construed as financial or trading advice...

Dots

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*** Click here for link to Economic Calendars for all upcoming events

Thursday, March 12, 2020

Market Stability: Are We There Yet?

WORLD MARKETS


Further to my last post, world markets continued to plunge in Thursday's trading, as shown below.

Source: indexq.org

S&P 500 E-MINI FUTURES INDEX


The S&P 500 E-mini Futures Index (ES) is currently trading after-hours (8:00 pm ET) near its Thursday close, as shown on the monthly chart below.

Price is caught around/near major support, comprised of:

  • the -1.75 deviation level of the long-term uptrending Andrew's Pitchfork channel taken from the 2009 low to 2020's high (2400ish)
  • the 60% Fibonacci retracement level taken from the 2016 low to 2020's high (2400)
  • the 40% Fibonacci retracement level taken from the 2009 low to 2020's high (2350)

Price has clearly broken below the bottom of the the channel around 2750, which usually signals that a new bearish trend will form.

The Rate-of-Change (ROC) and Average True Range (ATR) technical indicators have both spiked to new all-time extreme levels (I've shown them both with an input value of one period in histogram format to illustrate this clearly).

Such extreme spikes generally indicate that capitulation is near and that price may begin to stabilize soon.

We may see lower prices, however, in the meantime.


SPX:VIX RATIO


The SPX:VIX ratio has fallen off a cliff and closed at 32.87 (a level last seen in 2009), as shown on the following daily chart.

The moving averages have formed a new bearish Death Cross, signalling more weakness ahead for the SPX.

If that crossover holds, look for extreme levels of volatile price swings in both directions, with possible lower prices on the SPX around 2350ish, until we see a sustainable bounce, with conviction, and a possible retest of the lower edge of the channel around 2750.

A drop and hold below 2350 could produce a catastrophic spike down to somewhere between 2140 and 2030, or lower.


U.S., GERMAN & CHINESE FINANCIAL SECTORS


Finally, keep an eye on the XLF:SPX ratio daily chart. It's now down near a 5-year major support level and the moving averages have formed a new bearish Death Cross, signalling more weakness for the Financial Sector (XLF).

Price is attempting to stabilize the last several days, but if it drops lower, it could drag the SPX down, as well.


And, keep an eye on the next two ratios.

The first is the EUFN:DAX ratio (the European Financial Sector ETF compared with the German Index, DAX), and the second is the GXC:SSEC ratio (China's Financial Sector ETF compared with the Shanghai Index, SSEC).

They're also both at their respective major support levels.

A drop and hold below current price will likely drag their respective indices down, as well.



BOTTOM LINE


If the above-referenced three financial sectors remain much weaker than their index counterparts, then we'll likely see more weakness in world markets, in general, along with heightened volatility, notwithstanding a variety of monetary and fiscal stimulus measures currently being deployed or planned by central bankers and world governments.

As I mentioned in my last post, 2008/09 was a bank financial crisis.

This is an economic crisis, health crisis, and global supply-chain crisis, and one that is multiplying every several days in depth and breadth...not easily or quickly resolved by monetary and fiscal stimulus, particularly if they're not adequately and correctly targeted.

If conditions persist and market weakness persists, this may also become a bank financial crisis.

Watch for drops in consumer confidence and spending, along with rising unemployment numbers, for possible clues in this regard.

* UPDATE March 13...



A massive Friday the 13th turnaround occurred in the S&P 500 E-mini Futures Index (ES) following measures that were announced earlier by the Treasury Department, a subsequent White House press conference announcing a variety of measures that will be implemented in response to the coronavirus, including the declaration of a National Emergency by the President., as well as the passage of a virus relief package by the House late Friday evening, which has yet to be approved by the Senate.




Based on the above analysis of the Andrews Pitchfork study, 2750 is, technically, where the 10-year bull market trend reversed into a bear market trend.

We'll see if that level can be recaptured, with conviction, and held next week...especially if the US Fed cuts interest rates any further at their meeting on March 18.

The bear-market trend will be reversed once, and if, the ES eventually makes a new all-time high and establishes a subsequent series of new swing highs and lows on the daily timeframe.