Throughout several platforms such as Bloomberg, Twitter, Reddit, I've noticed many people who agree with the idea that throughout this pandemic and shut downs, certain markets should be reacting in a way that they are not.
At the beginning of the pandemic markets fell. The DOW and S&P completely sank taking out all gains from the past 3 years. Then came the quarantines, the city shut downs and unemployment claims skyrocketing. This would prompt an even further decline in the markets.
Before we continue, let's talk about what should happen when the stock market falls and a recession is being talked about. When this happens people turn to safe heavens such as: US Dollar, cash, gold, CHF, and now...BitCoin. Where has the indicators for gold and BTC been after the pandemic? Down. From March 9th to March 20th gold fell -14.57%. BitCoin also saw a sell off and dropped -57.77%. As far as the US Dollar, when we look at the DXY chart we do see a spike in the USD that is now retracing after reaching the 103 levels.
The recovery that S&P had during the month of April is illogical in my personal opinion given everything that is going on right now. Millions more Americans filed for unemployment benefits last week, sending the six-week total above 30 million since the coronavirus pandemic began to shutter businesses across the country. (Bloomberg Businessweek). Oil prices have tanked and there is a huge supply for very little demand. Small businesses are at risk of closing. Adding on to this the idea of trying to restart the economy by lifting all social distancing bans and opening cities back will only bring second waves of the pandemic, and more unemployment. The DOW and the S&P should not have made such moves in the past 6 weeks.
Let's look at this from a technical analysis point of view. In the graph seen here for S&P futures, ff we use the fibonacci retracement tool, starting from the high to the lowest point we can see that the spike from the past 6 weeks has come into the 0.618 level and respected it very well. Below is also an interesting article from Bloomberg that states that most investors are looking for another dip in the market before investing: "The majority of the world’s wealthiest investors are waiting for stocks to drop further before buying again, on concerns about the pandemic’s impact on the global economy, according to a poll by UBS Global Wealth Management. Among the surveyed investors and business owners with at least $1 million in investable assets or in annual revenue, 61% want to see equities fall another 5% to 20% before buying, while 23% say it’s already a good time to do so. Some 16% say that now is not the time to load up on stocks as it’s a bear market."
With this information and the logic of how the world works combined with a little technical analysis I don't expect the S&P to come any higher than the 3000 level in the following weeks. Rather I believe that it will range between the 0.382 and 0.618 levels, leading up to the 2020 U.S. Elections in November. That is when we will see if the market will break high or break low and set the trend.
DISCLAIMER: This post is purely personal opinion based on limited knowledge. This information should not be taken as an investment strategy. Before deciding to invest you should carefully consider your investment objectives, level of experience, and risk appetite. No information or opinion contained in this post should be taken as a signal to buy or sell any currency, equity or other financial instruments or services.
At the beginning of the pandemic markets fell. The DOW and S&P completely sank taking out all gains from the past 3 years. Then came the quarantines, the city shut downs and unemployment claims skyrocketing. This would prompt an even further decline in the markets.
Before we continue, let's talk about what should happen when the stock market falls and a recession is being talked about. When this happens people turn to safe heavens such as: US Dollar, cash, gold, CHF, and now...BitCoin. Where has the indicators for gold and BTC been after the pandemic? Down. From March 9th to March 20th gold fell -14.57%. BitCoin also saw a sell off and dropped -57.77%. As far as the US Dollar, when we look at the DXY chart we do see a spike in the USD that is now retracing after reaching the 103 levels.
The recovery that S&P had during the month of April is illogical in my personal opinion given everything that is going on right now. Millions more Americans filed for unemployment benefits last week, sending the six-week total above 30 million since the coronavirus pandemic began to shutter businesses across the country. (Bloomberg Businessweek). Oil prices have tanked and there is a huge supply for very little demand. Small businesses are at risk of closing. Adding on to this the idea of trying to restart the economy by lifting all social distancing bans and opening cities back will only bring second waves of the pandemic, and more unemployment. The DOW and the S&P should not have made such moves in the past 6 weeks.
Let's look at this from a technical analysis point of view. In the graph seen here for S&P futures, ff we use the fibonacci retracement tool, starting from the high to the lowest point we can see that the spike from the past 6 weeks has come into the 0.618 level and respected it very well. Below is also an interesting article from Bloomberg that states that most investors are looking for another dip in the market before investing: "The majority of the world’s wealthiest investors are waiting for stocks to drop further before buying again, on concerns about the pandemic’s impact on the global economy, according to a poll by UBS Global Wealth Management. Among the surveyed investors and business owners with at least $1 million in investable assets or in annual revenue, 61% want to see equities fall another 5% to 20% before buying, while 23% say it’s already a good time to do so. Some 16% say that now is not the time to load up on stocks as it’s a bear market."
With this information and the logic of how the world works combined with a little technical analysis I don't expect the S&P to come any higher than the 3000 level in the following weeks. Rather I believe that it will range between the 0.382 and 0.618 levels, leading up to the 2020 U.S. Elections in November. That is when we will see if the market will break high or break low and set the trend.
DISCLAIMER: This post is purely personal opinion based on limited knowledge. This information should not be taken as an investment strategy. Before deciding to invest you should carefully consider your investment objectives, level of experience, and risk appetite. No information or opinion contained in this post should be taken as a signal to buy or sell any currency, equity or other financial instruments or services.