Mid-term: S&P 500 is well below its 200-day moving average = Bearish. The longer it remains below its 200-day MA, the more bearish it is for the stock market.
One-month trend = Bearish. We are in a strong downtrend and it’s still as ugly as I’ve ever seen. I’m not sure what the Fed can do to reverse this crash-like plunge.
RSI: (S&P 500) @ 37.67 = Oversold. Unfortunately, there is still room for the market to fall more before another dead-cat bounce.
MACD: MACD in a free-fall. (MACD plunged below its Zero Line and plunged below its 9-day Signal Line) = Bearish
Daily Intraday Volatility (VIX): 57.83 (High) = Volatility has skyrocketed as fears over the virus and the market plunges have increased. Eventually, fear subsides, but for now, VIX is at extreme levels = Bearish.
Comment: Sunday night, futures are limit down after the Fed cut interest rates to near 0. I don’t ever remember a situation like this. Although the futures will likely plunge at the open, there is a chance there could be a reversal in the near future, but I wouldn’t bet on when it will happen. Beginners should stay far away from this dangerous market.
This is a trader’s market, and in the short-term, buy and holders could get crushed. I only hope you aren’t on margin, or didn’t bet everything on a dip. Although I don’t make predictions, I do study market history. As long as the indexes are below the 200-day moving average, it’s a bear market, and I will treat it as such.
Bear markets are not easy to trade. One day you’re plunging, the next day there’s a rally. As you can tell from the extreme volatility, you have a confused market with the added uncertainty of a pandemic ravaging the globe. It could get worse before it gets better, financially as well as physically. This is the time to study bear markets, and to make a trading or investment plan not only for the stock market but also for you and your family.
You can grit your teeth and hold, which I’m sure many will do, knowing that after 2008 we started a 10-year bull market. There is no evidence that will be repeated, however. You can also reduce what you own on every bounce. It would not be wrong to increase cash positions on rallies.
No one can tell you what is going to happen in the near future, but at the moment, it doesn’t look good. How long the bear market and coming recession lasts is unknown. One day the virus will be eradicated, and when that happens, we will focus on building our economy again. Until then, it could be a very rough road.
Bottom line: This is not the time to panic, but to prepare and plan for the future. Although I’m not surprised that the market bubble popped, I am surprised by the actions of the Fed, which have increased uncertainty and confusion. I truly hope they know what they are doing.
Read the following pieces from two analysts who have been warning us of the dangers for months. They continue to give excellent advice:
Sven Henrich (Northman Trader) on the most recent market collapse: https://bit.ly/39ReACQ
Lance Roberts, a money manager at (realinvestmentadvice.com), on how to invest during a bear market: https://bit.ly/2Qyg6Cj
For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA
For insightful analysis of the stock market, read Lance Roberts:www.realinvestmentadvice.com
For insightful analysis of economic conditions, read Wolf Richter:www.wolfstreet.com