In 2 weeks, SPX is resting on my 1st support zone which should usually take 2 months!
Updated: Mar 18
On Sunday, 15 March 2020 11.48pm, I emailed my Clients my latest post titled 'In 2 weeks, SPX is resting on my 1st support zone which should usually take 2 months!'. Below is the full transcript of my write up:
'Dear Clients . Never in my 16 years in PhillipCapital have I been so overwhelmed at the Desk! Non-stop calls and queries and late packed-lunch every day. I would like to apologize if I'm not able to answer to your query promptly. . Now back to business (if too dry, go straight for the conclusions below!) . In my 1 March post (www.thom-ng.com/post/finally-this-is-the-droid-drop-i-ve-been-looking-for), I said: '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.' . From the Chart attached, you can see that within two weeks, the S&P500 Index's (SPX) low 2480 is resting exactly at my said 1st level support - ie, the 11-year long term Demand Line (red-dotted).
As Friar Lawrence famously said in Romeo & Juliet - 'These violent delights have violent ends'. The extreme extensions last year is now staring at the same violent extensions down this year. However, I have to admit that even for me, the velocity of this meltdown was more violent than what I had originally expected. By the way, you may also have noticed that the price action in these two weeks' carnage never had a chance to even touch the Bollinger Bands (BB) midpoint even once... sounds familiar? In 2019 SPX's rally I said the same thing - price action hardly touch its BB midpoint when it is on the way up.. . So whats next? Now in my 1 March post, I also said: '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!' . If I can have it my way, the completion of this said Broadening Pattern will be at the 2000 - 2200 zone. I may be jumping ahead of myself, but for your heads-up a completion of this Pattern will see a correction magnitude of 41%. . More importantly, since SPX is so short-term oversold, you only need a very small catalyst to lit the fire for a reversal. FOMC's meeting next week might just fit the bill. One last problem to note is that til VIX (aka the Fear Index) is able to close below 30, wild swings of 1000+ magnitude in the Dow can still be expected. . Lastly, If the bounce is already underway, where will it end? High probability standard retracement levels are at the 50% to 61.8% level, BUT given extreme extensions seen of late in price action, do not be surprised by further extreme moves, ie targets may be stretched beyond standard Technical Analysis models. Clients, pls feel free to drop me a line to discuss where it could be as it develops. . Conclusion in Layman's Terms: 1. I'm completely overwhelmed at my desk (so is my back office), thus order execution & time-sensitive matters are prioritized over non-urgent enquiries. 2. Last 2 weeks' carnage fell out of my standard correction probabilities & structure. 3. Such violent selling appears to be compensating for the extremely stretched rally of 2019. 4. Current 2 weeks low appears to be held up by my 1st level support (2500-2700), first noted in my 1 March post. 5. A stronger bounce that can last a few weeks may materialize soon 6. Til VIX falls below 30, wild swings can still be expected. 7. If I can have it my way, final completion of this correction lies somewhere at the end of the SPX Broadening Pattern. Allocate your chips accordingly. 8. For local market outlook, pls see attached whatsapp message to my Clients (1a to 1 e). . 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 #spx13mar20 #sti13mar20 #globalalignment13mar20 #thedropihavebeenlookingfor #wytant #livelongandtradewell Charts: tradingview'