As the Chinese stocks are starting to show signs of weakness after a few days of upside movement, we expect the same scenario to play out in the U.S. market. With that said, the setup we introduced in a previous article remains valid. To support a thesis about a bearish reversal, we want to see MACD fail at breaking into the bullish zone on the daily chart; in addition to that, we want to see RSI and Stochastic continue declining.
Illustration 1.01 Illustration 1.01 shows two Chinese stock market indices we are paying close attention to.
Illustration 1.02 The picture above shows the weekly chart of MACD. A breakout below the midpoint is something to watch in the following weeks. If MACD succeeds in breaking below zero points, it will be very bearish.
Technical analysis gauge Daily time frame = Slightly bearish Weekly time frame = Bearish *The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Do you think if we hit a recession it will cause a price dump like we have seen with covid.
Ofcourse untill the printer goes on again. The big boy printer $ not tether haha.
Tradersweekly
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@clairebymax, Thank you for your question. I assume so. But it all depends on the central banks, what steps they will take, and how fast. For example, in March/April 2023, when regional banks began to implode, they acted very quickly and pushed problems further into the future. So, who knows how long they can keep kicking the can down the road?
louistran_016
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@clairebymax, this recession is the most widely anticipated event in the history of recession, therefore it cannot be a black swan event and market reaction will not be as you think I expect a new all time high and rip your face off rally across all asset classes
Tradersweekly
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@louistran_016, You are right about the anticipation. Furthermore, I suppose a lot of things changed after the pandemic in the behavior of investors, consumers, etc. So that should be taken into account as well. Nonetheless, I do not imagine the market selling off in one big red candle if the recession comes, rather, I imagine it as a prolonged period of selling (something similar to last year). There is still that phase in front of us in which the FED will start to decrease interest rates; if the FED is forced to do so, we will likely see this phase to be accompanied by a downturn in indices (based on history). That is my best guess. But as I said, who knows, you might be right and we will see a huge meltup.
Ofcourse untill the printer goes on again. The big boy printer $ not tether haha.