Last week the S&P 500 and Nasdasq both took out the previous week’s high, but were sold off immediately after the high was made on Tuesday March 31st. The Dow didn’t even take out the previous week’s high and it closed on the weak side on the weekly chart. This mixed picture points to a sideways to down market for approximately the next 10 trading days.
Because the March 23rd low is an important low when everything was sold off during the panic, this panic low will be tested more than once. This low should provide support during the first attempt to take it out in the next 2 weeks. With this mind, we believe the short term trading range has been established as 2191.86-2641.39. But the market can be tricky, it could exceed the top range at 2641.39 to try to reach the 2711.33 swing high to fool people. In our analysis, even it exceeds the swing high at 2711.33 slightly, it is still a bear market rally and it should be shorted from there if you trade both sides of the market.
This bear market is far from over, frequently the market will try to violate the known targets to present a confusing picture to fool the maximum number of people. The market’s sole purpose to create confusion and cause people to part with their money.
The oil price war is creating havoc in the credit market. Between the oil price war and the coronavirus, the oil price will be under pressure and therefore cause the market participants to liquidate equities to raise cash. The coronavirus may or may not be over by the end of April. No one knows how the economy will restart after such a forceful shutdown. So be very careful with your cash.
Tentatively, we plan to go long at the bottom of the trading range with the understanding that this is not the final low of the bear market. We will send out trade signals when the intraday reversal occurs near the March 23rd low.
Stay calm and be well.