My analysis of the US stock market for the month of February. Updated almost daily. So when you come back to this page press the refresh button for the latest update.
As we end the month of February 2020, let us take a look at the weekly chart of the S&P 500.
Wow what a nasty large red bar!
I think this must be one of the worst months for the S&P 500 and the Dow Jones.
However, when there is a crisis there is always an opportunity. Right now, the S&P 500 has drop to a weekly support area. Therefore, we should start to think about a bottom.
We should continue to monitor daily for a bottoming chart pattern, whether in the daily chart or the 60 min chart.
The use of the 60 min chart can be very beneficial. If we think that the market is about to bottom, we want to make sure that the smaller time frame confirms this.
We want to see the market turn around first in the 60 min chart.
So far, it is still in a 60 min downtrend. It is still below its 60 min 20 MA and 50 MA and therefore, even if we think that a bottom might be near, we should remain bearish or cautious till the trend changes in the 60 min chart.
So, continue to remain cautious till SPX goes back above the 60 min 20 MA and 50 MA.
Yesterday, the Dow Jones dropped below the daily 200 MA convincingly. This told us that the situation of the Coronavirus is much more serious than thought.
Well, we still have the S&P 500's 200 day moving average.
I think this will be a very very important line. In the past, when the S&P corrected it did not drop below the 200 MA. Or at least when it sliced through it, the SPX quickly went back up.
So today or tomorrow will be quite important. Let's watch and see if the SPX can stay above the daily 200 MA.
If it can, then we can be certain that a rebound is around the corner.
On the other hand, if even the 200 MA does not hold, then we could be in for some rough time ahead. But of course there is still the strong support area around 2980 to 2990 area. That is the area to watch if the SPX's 200 MA does not hold.
Taking a look at the 60 min chart of the SPX, we can see that it is in an obvious 60 min downtrend. It is below its 60 min 20 MA, 50 MA and 200 MA.
One should remain bearish or cautious as long as SPX is still below the 60 min 20 MA and 50 MA.
Yesterday, there was a bottoming tail in the 60 min chart. It tried to move back above the 20 MA but failed to hold its ground. It did not even manage to rise above the 60 min 50 MA.
If SPX drops below the low I highlighted above, then it could move lower again. Be patient and wait for it to form a bottoming chart pattern and move back above the 60 min 20 MA. And best if it can move back above the 60 min 50 MA.
Otherwise, most stocks won't be that nice for a long trade.
What a week it has been for the US stock market.
The Coronavirus fears as it spreads to South Korea and also Europe has made tremors to the US stock market. With authorities shutting down services and people are afraid of going outside, it could affect businesses and sales.
The aviation industry as well as the Cruise industry is one of the hardest hit. I myself have cancelled a holiday to Vietnam and I was to go on a Princess Cruise in Asia but Princess has cancelled the cruise which is in May.
Yes, it is the same cruise line as Diamond Princess which was quarantined at the Yokohama port.
Many many losses for businesses and this fear causes the big sell off.
Right now, the Dow has dropped to its daily 200 moving average. This is an important moving average and it can be a very important support area.
I think that the Dow might stop falling here because:
Well, these technical confluences do give us some confidence that Dow may stop dropping. But we will need to see if it can stabilize here. Perhaps a daily bottoming tail might give us a hint of a reversal.
However, if there are many more cases of Coronavirus in the world and if it spreads more to Europe and also North America then the Dow could fall more and even break below support.
We can also look at the 60 min chart for more clues.
The SPX formed a 60 min bottoming tail just now and it is trying to go back above the 60 min 20 MA.
I think the lows of the 60 min bottoming tail will be important. As long as SPX stays above the lows of this bottoming tail, then this could be a short term bottom.
We want to see it continue to stay above the 60 min 20 MA and also trade back above the 60 min 50 MA.
The best is it could form a bullish reversal pattern in the 60 min chart. So do continue to watch and monitor the 60 min chart of SPX, Dow and also the Nasdaq.
SPX is at a very important support area now.
If it drops below this area, then there could be more sell off.
However, if it can find support at this area, it might be able to bounce back up.
In order to see whether support will hold or not, we need to employ the use of the 60 min chart.
The 60 min chart above shows us that the sell off has slowed down. Watch the two trend lines that I have drawn above.
If SPX can break above the horizental line, then perhaps it might go back up. We want to see it go back above the 60 min 50 MA as well and then have a bullish 20 MA cross above 50 MA.
On the other hand, if SPX drops below the lower trend line, then it go sell off again and go lower.
Last week I mentioned about the greens support area, a double bottom and a 60 min break downtrend line. Well, the market failed to form a meaningful double bottom.
It dropped below the anticipated double bottom and thus the sell off continued.
There was no break of the downtrend line as well. Therefore there was no special reason to believe that it will rise back up to make new highs.
The sell off because of the Coronavirus is quite deep.
The fear that this virus will affect many industries and also the world economy is a serious thing and therefore the sell off.
We are not out of the woods yet as the SPX is still below the 60 min 20 MA. Therefore, do remain cautious on the SPX.
Last week I showed you a chart of the daily chart of the SPX as well.
The 20 MA did not hold and neither did the former high support hold. The sell off has now brought the SPX down to its daily 50 MA and also another price support area.
Will it hold?
Well we have to see if it will stabilize at this area. If it can, and forms a bottom in the 60 min chart, this could be a great buying opportunity.
Otherwise, if the support does not hold, then more serious correction might follow.
The US market had a nasty drop yesterday. I think the green support area of the previous high is doing its job quite well as a support area.
And it might provide a support again this time.
A double bottom in the 60 min chart might be forming and if SPX futures can trade above the 60 min downtrend line, then it might move back up and continue to make new highs.
Otherwise, if it drops below the double bottom, then more correction will come.
If we take a look at the daily chart of the SPX, we can see that the drop yesterday was just a blip and a big long uptrend. The previous high support is still there and SPX has not drop below it yet.
SPX is still above its rising daily 20 MA, 50 MA and 200 MA.
I think if SPX can stay above the support area and meet the 20 MA and find support there, then the US stock market will continue to rise and make new all time highs.
QQQ has broken above a 60 min ascending triangle. This is a bullish continuation pattern.
Take note of the rising 60 min 20 MA, 50 MA and 200 MA as well. QQQ is still above these 3 moving averages and this show bullishness.
Therefore, we should continue to have a bullish bias.
The top of the ascending triangle pattern will be a new support for QQQ. As long as QQQ stays above this area then QQQ is likely to move higher.
When the techs move higher and lead the market, the entire stock market will continue to rise.
ROKU is a stock that has had a lot of wild swings.
If we draw a line that connects the highs and the lows we could see a possible large triangle that may be forming.
A breakout above the triangle might send the stock higher and since this is a large triangle, this means that the long term prospects for ROKU will be good and it will move higher in the long term.
The lower trend line is also near the rising 200 MA. This gives us a better support as the rising 200 MA can be a powerful support.
As long as ROKU stays above the lower trend line and the rising daily 200 MA, then it could move up and perhaps break above the upper trend line in the future.
Hope you had a great long weekend. US market was in holiday yesterday.
Today as the market reopens, the future is weak after HSBC decides to cut jobs and also Apple warns of the impact of Coronavirus on its revenue.
Therefore, the futures are dropping.
The 60 min SPX shows us how the index has broken below a 60 min uptrend line. It also formed a bearish 60 min 20 MA cross 50 MA. This shows weaknesses and therefore one should be cautious of more weaknesses.
Right now the SPX is sitting at a support area. This is also where the rising 60 min 200 MA is. This will be crucial.
If SPX is able to stay above the support area and the 60 min 200 MA, then perhaps it will rebound and the move higher. On the other hand, if the SPX drops below this area, then there could be further weaknesses.
When it comes to trading, always choose a very good setup before entering.
Using the 60 min chart allows us to spot nice swing trading environment.
The last one was where the SPX broke above a 60 min downtrend line and where it formed a 60 min ascending triangle.
Right now I do not see any nice pattern yet.
But if SPX manages to stay above support then it will rebound back up and perhaps continue to make new highs.
Yesterday, the SPX manage to stop dropping at the previous highs support. It also did not drop that much below the 60 min utprend line that I drew yesterday.
Indeed it formed a doji type of candlestick and then it reverse back higher.
This reminds us that it is a good idea to watch for bullish reversal candlestick patterns like the doji or bottoming tail when the index is at a support area.
The rising 60 min 200 MA tells us that we need to have a bullish bias on the US stock market.
I have extended the uptrend line higher and I think this will be a good way for us to gauge the stock market short term. As long as S&P stays above this uptrend line then we can expect higher prices.
If it drops below this trend line then we should expect slowing momentum.
China just reported a massive spike in Coronavirus infection. They used another measure and the cases gone up by I think 15000 in one day. This spark more fear in the market about the implication of what it might have on the world economy.
Currently, the S&P 500 is challenging the previous highs support. It is also sitting at an uptrend line. This should provide some support and if support holds then S&P might reverse and go back higher.
But if S&P slashes through this support area and goes below the uptrend line, then there could be more weaknesses and the S&P might drop to the rising 60 min 200 MA.
If it drops to the 60 min 200 MA area, we shall try and see if there is any bullish reversal pattern in the 60 min chart.
The S&P 500 has run up quite a lot since it broke a 60 min downtrend line and the 60 min ascending triangle. So, it is not surprising that it is correcting again.
The 60 min chart of the SPX above shows that the index is still in a 60 min uptrend.
It is above its 60 min 20 MA, 50 MA and 200 MA. Therefore, we should continue to remain bullish on the S&P 500.
Notice the green area that I have highlighted.
That is the previous high support area. A previous high that is overcome will be a new support area. And as long as S&P 500 stays above this green area, then it is likely to continue to move higher.
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