Finally, this is the droid (drop) I've been looking for!
On Sunday, 1 March 2020 11.37pm, I emailed Clients my latest post titled 'Finally, this is the droid (drop) I've been looking for!'. Below is the full transcript of my write up: Dear Clients Apologies, couldn't rush out a post on time during the week as I was so caught up in the dealing room with this global meltdown, among other activities.. Did a married deal midweek, onboarding a Family Office and had a PE meeting late week. However, even with that, I continue to track dear Mr Market very closely. Pls see my attached whatsapp replies to some of my clients dated 28 Feb 2020 (Friday) for the current state of affairs in the market.
'It never rains but it pours' - I reckon that's quite an apt statement to describe the current global meltdown. Let me shed some light on what I meant - the relentless selling in the US markets was one, but note that even the Shanghai Composite Index (SSECOMP) which was mostly unaffected by the US malaise for 4 market days straight, caved in too on Friday and closed down 3.7% (due to horrendous China PMI data announced on Sat?). With that double whammy from her big brothers, Singapore's STI gapped down further & closed -3.2% on Friday. Further, Gold deprived me the pleasure of hitting at least the psychological 1700 this past week before succumbing to broad profit taking as well. The argument out there was that speculators were urgently taking profit on gold to cough up cash to meet cash calls elsewhere in the equities market. I'm not sure if this is definitely the reason but more importantly from a Technical Analyst's point of view, when the time is ripe for Gold to shine and yet it did not, was indeed a concern for me. But that's a post for another day. Now to the the good news and bad in equities, looking forward:
The Good News: Shorter term: The good news is that S&P500 Index (SPX) is likely going to see a relief rally of sorts pretty soon due to the following reasons on Friday close: 1. VIX (Fear Index) gets extended to almost 50. This is panic room alright. 2. RSI sank below 20. 3. High volume on Friday appears to look like a 'Capitulation' day type of volume. 4. Friday also sports a bullish reversal Hammer Pattern in SPX, DOW & QQQ. Longer term: If you've been a keen follower of WYTA (whatsyourtradingangle), you will know that this US meltdown has been that important 'alignment' to the world's markets that I've been looking for! - https://www.facebook.com/whatsyourTA/posts/813892765741905 Again this will be a post for yet another day.
The Bad News: I view the US rally of the past 4 months (Oct 2019 - Feb 2020) as exhibiting 'excesses' or 'extensions' and therefore price action to the downside now appears to be seeing similar 'extensions' too. With this in mind, the long term trendline (red dotted) is likely an important Demand Line to hold up this 11-year bull market. An authoritative breach below it will trigger my next important support level. You see, my big picture SPX Broadening Pattern (see https://www.facebook.com/whatsyourTA/posts/634005333730650) never really went away. An authoritative breach below the 11-year long term trendline will likely see price action gravitate towards the lower end of that green Broadening Pattern.. Yucks!
Conclusion in layman's terms: I view the US rally of the past 4 months (Oct 2019 - Feb 2020) as exhibiting 'excesses' or 'extensions' and therefore price action to the downside now appears to be seeing similar 'extensions' too. However, saying that I'm anticipating a relief rally of sorts soon. Beyond the bounce, likely more pain ahead! Live Long & Trade Well. Thank you & rdgs Thomas Ng, CMT Principal Trading Representative 首席股票经纪 www.thom-ng.com #plsreaddisclaimer #chartforillustrationonly #spx28feb20 #ssecomp28feb20 #sti28feb20 #gold28feb20 #globalalignment28feb20 #thedropihavebeenlookingfor #wytant #livelongandtradewell Charts: tradingview