Stock Market Analysis - 3/25/2020 - $SPY $DIA $QQQ $VIX

It seems like the overall market outlook has changed and for the better. With a looming $2 trillion stimulus on the horizon, markets have broke the intermediate trend and looks to be in a stage of recovery. Since my last analysis, I expected markets to start to consolidate at this level and this looks to be the case. Although the downtrend has terminated, this does not mean a uptrend has started. The intermediate trend is now neutral and we need to start looking for clues (higher lows and higher highs) that could initiate a new uptrend. Fundamentally, we still do not know what toll this virus will put on the economy. This will become more clear as unemployment, consumer sentiment, and industrial numbers for the quarter are released in the near future.

First, lets look at the SPY . Yesterday, SPY gapped up and broke above the downsloping trendline and closed at HOD - a good sign for a followthrough day. Today we got a somewhat flaky followthrough day as we closed at the middle on the range following a large selloff at the end of the day. The intermediate term trend is currently neutral. For a bullish case, I would like to see SPY test the 235-238 area where the 5DMA and Anchored VWAP from the lows align. Otherwise we could easily a retest of lows.

I won't go too in depth with QQQ and DIA today as they all look very similar to the action on SPY ; however it is important to note today's changes in each index. QQQ closed red at -0.74%, DIA closed green at +2.54%. Notice the relative strength in DIA and relative weakness in QQQ . During Bear markets, it is common to see rotation out of previous leading sectors such as Technology ( QQQ ) and into utilities and industrials ( DIA ). A quick google search about Sector Rotation can better explain this phenomena. This type of price action are clear indicators we are in a bear market and until we see rotation back into leading sectors such as technology, this bear market will continue to persist.

The price action on VIX is quite telling for what the future could hold. Although we had a nice reaction bounce yesterday and today, VIX recovered it's initial gap down and closed green today. VIX looks like it is consolidating and could breakout tomorrow. I expect VIX to retest highs.

Overall, the intermediate trend and the short term trend are both neutral and volatility is still high. These are not favorable conditions for the swing trader. Until we see trending conditions, now is not the time to put on new trades. Instead, as a swing trader you should use this time to start looking for new long or short ideas. When markets start to trend, you will be ready to take advantage of the new leg up or down.


Excellent insight and well written. Obliged.
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@Andimolz_, Thank you!
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