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| From The Desk of The Trader |
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Financial Freedom HQ
Hi Folks:
There's an enormous amount of angst and consternation after the last 7 stock market sessions.
As an intraday trader, I have to admit the selling has been incredibly aggressive at times.
So the question being asked everywhere is are we at the beginning of a down trend in stocks or are we completing another deep pullback (to the point of being a technical correction) this time?
As a chartist, I am firmly in the pullback camp until the price action proves me wrong.
As you'll see from the charts below the major up trend in stocks isn't even in danger yet. For sure, that trend will end eventually... there's always a deep drop just around the bend. But lots of people have lost a lot of money trying to anticipate the beginning of the next drop.
Don't be one of them...
The price action will not only tell you when down is more likely than up... It will confirm that message.
Have a look at the charts. Keep in mind that the last candle on the monthly charts is not nearly complete as the charts are as of the close Friday 9 February 2018.
S&P 500 All support levels are pretty far down... the recent action is "interesting" perhaps, but not especially impactful given the strength of the larger trend. |
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Dow Jones Industrial Average Not different from the S&P 500. The big support zone in yellow suggests price needs to fall a lot further before the trend is in danger. |
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Nasdaq 100 ETF (QQQ) Driven by the performance of FAANGM (shown below), tech looks even further away from support. |
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S&P 500 3x Leveraged Inverse ETF This weekly chart shows that the signal fired week before last and is still in profit. It's doing a great job and acting as a hedge to the upward bias. |
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FB Facebook has barely suffered in the face of the selling in the overall market. |
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AMZN Like it's FAANGM brother, Amazon weathered the selling onslaught and remains well above support. |
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AAPL The selling in Apple started before that in the overall market... and it went deeper than the levels seen by other FAANGM stocks. That said, it still bounced nicely off support. |
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NFLX Netflix's price has to get below last month's low before there's even a chance of its trend reversing. |
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Bitcoin Given Bitcoin's close on this weekly chart after visiting a pretty strong support area, the crypto appears ready to retrace some of its recent fall. Wait for the signal to confirm by price trading above last week's high. |
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Etherum Ethereum looks almost identical to Bitcoin. Treat it the same. |
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US Dollar Index Dollar weakness has helped propel some of the the strength of this late stage bull, so it's interesting that the stock market is stumbling at he exact moment that the dollar finds long term support. |
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Crude Oil Crude is at a big resistance level... and acting that way. |
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GLD Gold continues to hold above support... Expect GLD to push higher as a "safe haven" if stocks continue their decline. |
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TNX Rising interest rates is the culprit most frequently cited for the beginning of this selloff. As this monthly chart shows we've spent a lot of time below 3% on the 10 year... and quite a bit of time under 2%. The rate does look to have bottomed, based and like it's ready to move back up through 3%. If that happens you can expect more nervousness (if not outright decline) in stocks. |
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This mini review was neither designed nor intended to induce you to do anything. It's instead, a look at where we are and what's likely to happen in light of where we are.
As always, stick to your process and let that deliver the results you seek.
KIS,
The Trader |
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