Dow Jones Doji and 23.6% Fib Cross
The Dow Jones Industrial average saw a $459 gain today, up +2.4% from an opening price of $21,050 and a close of $21,200. Price had seen a high of $22,019(+4.6%) intraday as investors placed hopes on the passing of the coronavirus economic relief bill, but gave up half of the days gains late in trading as the bill fell through and was once again pushed back to a later date.
Today’s price candle closed above the 23.6% Fibonacci retracement level on the daily chart, but in doing so created a doji candle which indicates trader indecision. A doji candle is a price candle with a small body and upper/lower wicks of relatively same length. The small body shows that even though price moved higher and lower throughout the day(wicks), traders ultimately closed price back near where it opened as neither bulls nor bears were able to move price with conviction in either direction which created the small candle body. In the short-term, price needs to hold above the 23.6% retracement level in order to maintain the bullish sentiment that was seen over the past two trading days as hopes of a relief bill have given traders reason to buy.
Worth noting is that there was a gap created in price from the close on Monday to the open on Tuesday, and gaps tend to be filled in charts which indicates that we will likely see price come back down and test Monday’s closing price near $18,600 at some point in the coming days. I’ve never found a clear explanation as to why gaps are filled in charts, my assumption is that the gaps represent unfilled orders that the market wants to clear out before moving price higher or lower.
While the passing of the economic relief bill is giving traders reason to buy in the expectation that a bottom is in, the lack of an actual bill being passed still places the ball in the bears court. Even once the bill is passed, it will take a few weeks for the money to begin trickling down to businesses and citizens as the funds will not be immediately available to those who need it, and during that time, we are set to see a rise in coronavirus case counts, rising unemployment and more states imposing lockdowns causing more businesses to shut down and lay off staff. As those numbers come out going forward, the bear case will strengthen as it is still not yet known if the total $2 trillion being given to companies and citizens will be enough to cover the full damage being done to the economy since we have yet to see a peak in the coronavirus outbreak or even have an idea of how long this pandemic will last. Should state lockdowns and a slowdown in the economy continue for a period of time longer than just 2-3 weeks, there is a good chance that another round of fiscal stimulus will be needed.
The one-time $1,200 check to Americans is likely to have little impact for those out of work if their time unemployed lasts longer than 2-3 weeks as statistics show that 33% of Americans are living paycheck-to-paycheck and 58% of Americans have less than $1,000 in savings. The $1,200 check might help float them for the month of April if they haven’t already begun falling behind in bills due to the record layoffs we’ve seen over the past two weeks and the average of 2 week lag time between applying for and receiving unemployment benefits.
The full $1,200 stimulus checks are only being given to those making under $75,000, with those making over $75,000 seeing a decrease of $5 for every additional $100 in income over $75,000. While many assume that those making over $75,000 likely have enough money saved that the need for $1,200 isn’t as dire as it is for those making under $75,000, 62% of Americans who make between $75,000-$100,000 also have less than $1,000 in savings. Turns out that a higher income doesn’t equate to saving more in today’s world.
Tomorrows job numbers release by the Bureau of Labor Statistics is forecast to show an estimated 1-4 million people being added to the ranks of the unemployed which will be the largest weekly rise in unemployment in U.S. history and is likely to shake confidence in those hoping that the current economic relief bill will be enough to turn the stock market around. The tide in layoffs likely won’t be receding any time soon either which will put further strain on the bull case in stocks going forward.
The longer the economic relief bill takes to be passed the more bearish traders will become as waves of negative economic news are set to roll out over the coming weeks and months. Until company revenue and earnings are released showing the extent of the damage it is impossible to know how hard businesses are being hit right now. All hopes in a stock market rebound are being placed on a fiscal stimulus bill that is mostly nothing more than our leaders throwing money at a health pandemic and winging it as they have no idea if it is a large enough amount, which is why they went with such a big number. Their predictions are more of guesses right now and all of the publicity around the economic relief bill is more of an exercise in marketing and confidence building to prevent further losses in stocks and a prolonged economic downturn. The sad truth is, they don’t have any better idea of what is going to happen than we do. Since 2008 the only tools they have had to fight economic slumps and falling stocks is a printing press and bailouts, and if the only tools you have are a printing press and bailouts then every problem has to look like a money problem. Our current problem is not a money problem, it’s a health problem. The longer our leaders deny that fact the worse the problem is going to get. But hey, here’s $1,200 in the meantime while we try to figure it out.
View is still bearish in stocks going forward with the opinion that all bounces are good opportunities to sell or short.
Today’s price candle closed above the 23.6% Fibonacci retracement level on the daily chart, but in doing so created a doji candle which indicates trader indecision. A doji candle is a price candle with a small body and upper/lower wicks of relatively same length. The small body shows that even though price moved higher and lower throughout the day(wicks), traders ultimately closed price back near where it opened as neither bulls nor bears were able to move price with conviction in either direction which created the small candle body. In the short-term, price needs to hold above the 23.6% retracement level in order to maintain the bullish sentiment that was seen over the past two trading days as hopes of a relief bill have given traders reason to buy.
Worth noting is that there was a gap created in price from the close on Monday to the open on Tuesday, and gaps tend to be filled in charts which indicates that we will likely see price come back down and test Monday’s closing price near $18,600 at some point in the coming days. I’ve never found a clear explanation as to why gaps are filled in charts, my assumption is that the gaps represent unfilled orders that the market wants to clear out before moving price higher or lower.
While the passing of the economic relief bill is giving traders reason to buy in the expectation that a bottom is in, the lack of an actual bill being passed still places the ball in the bears court. Even once the bill is passed, it will take a few weeks for the money to begin trickling down to businesses and citizens as the funds will not be immediately available to those who need it, and during that time, we are set to see a rise in coronavirus case counts, rising unemployment and more states imposing lockdowns causing more businesses to shut down and lay off staff. As those numbers come out going forward, the bear case will strengthen as it is still not yet known if the total $2 trillion being given to companies and citizens will be enough to cover the full damage being done to the economy since we have yet to see a peak in the coronavirus outbreak or even have an idea of how long this pandemic will last. Should state lockdowns and a slowdown in the economy continue for a period of time longer than just 2-3 weeks, there is a good chance that another round of fiscal stimulus will be needed.
The one-time $1,200 check to Americans is likely to have little impact for those out of work if their time unemployed lasts longer than 2-3 weeks as statistics show that 33% of Americans are living paycheck-to-paycheck and 58% of Americans have less than $1,000 in savings. The $1,200 check might help float them for the month of April if they haven’t already begun falling behind in bills due to the record layoffs we’ve seen over the past two weeks and the average of 2 week lag time between applying for and receiving unemployment benefits.
The full $1,200 stimulus checks are only being given to those making under $75,000, with those making over $75,000 seeing a decrease of $5 for every additional $100 in income over $75,000. While many assume that those making over $75,000 likely have enough money saved that the need for $1,200 isn’t as dire as it is for those making under $75,000, 62% of Americans who make between $75,000-$100,000 also have less than $1,000 in savings. Turns out that a higher income doesn’t equate to saving more in today’s world.
Tomorrows job numbers release by the Bureau of Labor Statistics is forecast to show an estimated 1-4 million people being added to the ranks of the unemployed which will be the largest weekly rise in unemployment in U.S. history and is likely to shake confidence in those hoping that the current economic relief bill will be enough to turn the stock market around. The tide in layoffs likely won’t be receding any time soon either which will put further strain on the bull case in stocks going forward.
The longer the economic relief bill takes to be passed the more bearish traders will become as waves of negative economic news are set to roll out over the coming weeks and months. Until company revenue and earnings are released showing the extent of the damage it is impossible to know how hard businesses are being hit right now. All hopes in a stock market rebound are being placed on a fiscal stimulus bill that is mostly nothing more than our leaders throwing money at a health pandemic and winging it as they have no idea if it is a large enough amount, which is why they went with such a big number. Their predictions are more of guesses right now and all of the publicity around the economic relief bill is more of an exercise in marketing and confidence building to prevent further losses in stocks and a prolonged economic downturn. The sad truth is, they don’t have any better idea of what is going to happen than we do. Since 2008 the only tools they have had to fight economic slumps and falling stocks is a printing press and bailouts, and if the only tools you have are a printing press and bailouts then every problem has to look like a money problem. Our current problem is not a money problem, it’s a health problem. The longer our leaders deny that fact the worse the problem is going to get. But hey, here’s $1,200 in the meantime while we try to figure it out.
View is still bearish in stocks going forward with the opinion that all bounces are good opportunities to sell or short.