Today I’ll be rather to the point, as I want to go through some of my own thoughts, along with pass a few research comments over to you from a couple of smarter people than I am. On Thursday or Friday, I will post an updated Bear-o-meter report, per a readers suggestion.
Mid –termed SPX chart
The S&P 500 looks to be nearing, but not at the end of its meltdown. Recall that my view is for an eventual consolidation “box” per this blog.
On the above chart: Longer termed momentum indicator MACD needs to settle and roll up—its nowhere near that point yet., Even RSI and Stochastics are not rolling up yet. Having said that, they are just entering oversold territory. Perhaps there is a bit left in the selloff. Perhaps things will bounce around enough for a bullish hook setup. The point is, things are pretty oversold, and it’s a matter of time before a meaningful rally occurs. Note that next-support below 2850 is just over 2700. So far, that’s held. Sentimentrader notes: Such widespread selling was only matched twice: once during the 2008 financial crisis and once during the August 2011 global stock market crash. Both cases led to a rally over the next month.
Longer termed SPX chart
Technical Analyst Associate and ValueTrend Intern Aleks Bozic drew a 40-period SMA on a monthly chart above (thus, a 40-month line, which equates to something like 3.25 years!) on the SPX. He notes that we can see the importance of the SPY holding or breaking this 40-month Moving Average in 2012, 2016, and 2018. Let’s see whether it holds now in 2020. As of right now we are still in an uptrend on the Monthly Chart. We haven’t broken the 40 monthly moving average. If we break, like what happened in 2001 and 2008, it might suggest that we are officially in a downtrend on the monthly charts.
Larry McDonald on why he likes Emerging Markets, Materials and yes, even energy!
After over 30 months of Brexit, Trade War and COVID19 risks – still too much capital is hiding out in the USA. Next 12 months, we expect a US dollar collapse with emerging markets (EWZ, EEM, ECH, EWY) offering large upside returns. Likewise, drawdowns in materials XME (-79%) and Energy XLE (-67%) are at high capitulation, screaming buy levels. In the months ahead, we expect a multi-trillion fiscal response from G20 countries. Sell the rallies in US equities and put money to work in EM, materials, and energy. Historic capitulation = opportunity.
Larry on China China Xinhua News: Wuhan has closed all of its 16 public facility-turned temporary hospitals as the number of COVID-19 patients continues to drop in the city
China cases slowing are a positive sign for the global economy that the virus’ spread will not continue at a parabolic rate globally. However, the United States has clearly not taken the same precautions at stemming the outbreak compared to other countries. In our view, this speaks to emerging markets, Europe, and China coming out of this slowdown before the US. Much like the was first into the financial crisis and first out.
The next Webinar features ValueTrend Fundamental Analyst Craig Aucoin, CFA. He will discuss how we tie fundamental factors in with technical factors in selecting stocks. Link to sign up for the webinar here.
Thanks Keith. I am sure all of your readers really appreciate all of the blogs and valuable insights you have been sharing with us in these tumultuous times.
Just checking in, it’s been awhile. I’m a buy and hold fundamental guy (yes, I went over to the other side). It’s scary right now but I always hold on during these sell-offs. I try to stay familiar with what the companies in my portfolio are doing. I own all of the Brookfield stuff. I’m primarily a dividend growth investor.
I track the momentum of the breadth of the NYSE and Nasdaq as a way of taking the market’s temperature but I have to admit, I never saw a sell-off like this coming. The market will test your resolve from time to time on both the technical and the fundamental side…
Truthfully, Gavin, anyone who says they saw the degree of this selloff is either lucky, a broken clock (which is wrong most of the time then right once) , or full of BS.
Yes, markets were overbought. We raised cash and bought gold/silver. But nothing like hindsight now suggests we coulda/shoulda/woulda.
Right now, all you can do is look for bounces if you wish to raise cash. And they are rare.
At the end of the day, this too shall pass, though. So your portfolio, like mine, is a paper loss, not permanent reality.
A few minutes ago WHO annouced the Covid-19 is now an official ‘Pandamic”. The fear in the markets has not been seen since 2008/09 with new records being set of the indexes going up and down. I must say, as the COVID -19 numbers continue to increase in the U.S.A the indexes will cotinue to be under pressure. What worries me most, is the way the media is blowing this out of proportion, creating panic and fear. I was shocked when Angela Merkel came out today and said up to 70% of Germans will be infected with Covid-19……as a leader of German her job is to display calmness and not add fuel to the fire. The markets do not care of stimulis right now, as people will not be going ‘out’ to spend as usual. It looks like hedge funds will start blowing up soon, and massive layoffs will be hitting the headlines. Now I wonder, how many more countries will be joining Italy in closing thier borders. My drive to work today was with little traffic, people are scared, this is going to get much much worse ….hang on tight.
Who will want to buy equities when it’s likely that earnings for at least the first two quarters will likely be poor.
I’m glad I went to cash. S&p is going below 2600 now
Potential head and formation starting on monthly S&P chart. A bit more downside then up to about 3000 where it rolls over. Makes sense fundamentally as earnings hit are to come
Fear factor won’t get worse than today and maybe the next few days in the public.
thanks Martin–this jives with the medcan report
The 2009 correction was 50%. This has been 25%. But I think now that it will correct to almost the same 50 % (possibly 40 to 50%) as it did in 2009. That would bring us down to around the 200 level on the S&p. The vix has no resistance now until 90 which was last seen in 2009
Dave if you subscribe to our newsletter there are thoughts around that we’ll be sending out today
I, too, am a buy and hold type. But I currently hold about 15% of my portfolio in cash, unusual as I am almost always 95 to 100% invested. But I am not prescient. I was busy re-balancing and not yet re-invested when this stuff hit.