The question we are tracking is as follows:
After the 61.8% pullback from the sell-off, assuming equities do not advance beyond 3177, sellers have the possibility of opening a final leg lower opening the capitulation in the global economy. By playing the 5th wave lower, sellers release tension in the congested areas as naive short-term specs continue buying for no apparent reason. So why do these levels matter? Well, the 2892 is the measured target in the sequence from the March 23rd lows, could buyers break back up as re-openings unfold? Not really possible as another test of the lows would be much healthier from a bulls perspective. It gives more time to load and re-position, even if in some modified form.
The next cycle down in the economy looks set to last into 2021, in other words all those expecting a V shaped bounce and running from the lows as quickly as you can are dividing the flows into two halves. For the sake of convenience we shall call this a "dead-cat-bounce". Remember we are tracking the two important fundamental charts on the macro side:
"Alpha Protocol: Seeking Immediate Extraction"
Further pockets of shutdowns and social distancing measures will weigh heavy on consumer confidence, it looks unavoidable for the Northern Hemisphere Winter (December 2020) while in the background cooking there is a powerful urge to move away from Oil that seems to be unfolding. After the inconsiderable disadvantage US producers were put under via Russia, China and S.A, the battlefield has emerged:
But moreover, thanks to protectionism China and US are moving towards escalation. Foreign policy will provide the narrative for this final leg lower, Trump will attempt to establish lines of communications later in the Quarter with Xi although the damage has already been done. Follow the flows... capture the final leg lower in global equities, while the rest panic and begin to think its doom and gloom forever we can obtain the lows with cheap bids to exert pressure on soft buyers and later sellers (we can update the charts as we get down there later in June).
As usual thanks for keeping the support coming with likes, comments, charts, questions and etc!
This + FED + 65% of the march rally fueled by short squeeze.
I am afraid a lot of people will be disappointed if/when the bubble burst.
What caught my eye is the developing covid situation in emerging markets. I think that we are about to be washed by a wave of headlines on that front. Brazil, Russia, India, Saudi, Mexico, Chile, perhaps China too (some rumors about Chinas northern provinces) - are all about to get / already are out of control. This implies - more suppressed global economy with much more uncertainty.
On the US side - living in Austin I also get the sense of what is happening on the streets here and other southern states - 75% business as usual - 25% sit home or minimizing the contact. It surprised me a lot how many people I see in packed restaurants and some restaurant bars in some parts of the city. Like there was no pandemic at all. So the states opening was too early i think or people stopped giving a duck. I think there will be resurgence of covid cases in the southern states pretty soon. I follow the numbers daily and these last 3 days there was a slight uptick in US. Lets see what will happen next week.
To the point - I almost finished constructing my short position this past week. Will put some touch-ups next week market allowing. Perhaps a quick intraday spike to 3000 followed by a slap on a hand?
The markets are concerning me and my short position. The amount of money printed is incomprehensible. I dont have the calculus skills to quantify the overall effects on the market. Trade safe stay healthy.
The economic side of things is a different story, but it seems like vital economic statistics are not being taken seriously, not yet. So given the fact that market does not react to negative news and rockets on a bare promise of a working vaccine it is hard to see serious down movement in the near term (few weeks).