My 15 March post laid the scene of the past two weeks!
On Sunday, 29 March 2020 11.11pm, I emailed my Clients my latest post titled 'My 15 March post laid the scene of the past two weeks!'.
Below is the full transcript of my write up:
Last Tuesday a long time Client & follower of my WYTA blog messaged me and said that 'the World has gone mad and I've gone quiet'.
I replied in agreement with my Client 'that the World has indeed gone mad BUT I didn’t go quiet..'.
I actually did pen a new post last Sunday but then realize that I didn’t have anything new to add with reference to my 15 March writeup (www.thom-ng.com/post/in-2-weeks-spx-is-resting-on-my-1st-support-zone-which-should-usually-take-2-months).
So what exactly did I write up on 15 March?
4 main points, for your perusal:
1) 'If I can have it my way, the completion of this said (S&P500) 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%.'
S&P500 Index (SPX) past Monday (23 March 2020) low was 2191. Instead of taking the multi-month route, SPX took the direct escalator down to my prestated 2000-2200 zone.
While the current SPX price action has yet to touch or exceed the lower end of its Broadening Pattern, the drawdown in price from its peak on 19 Feb 2020 to date is already 35%. Further, SPX recent low has already exceeded the 24 Dec 2018 closing low.
Therefore, IMHO, the spirit of the analysis has been fulfilled, ie the bearish Broadening Pattern has been executed elegantly, though the final bottom may yet be in. I would love to call this Correction complete, but I still have my doubts.
May I say.. the execution was elegant in spirit, body and mind.
My biggest concern now is the overshooting in this Pattern COULD CUT BOTH WAYS (well DJIA was an example).. watch this space..
2) '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.'
The FOMC meeting didn't get the job properly done but Powell sure did. Our favorite Chairman said this past week that 'there was essentially no limit to the Fed’s emergency lending ability'. That's essentially a code word for 'blank cheque'. And wow, a fire did he lit for a reversal! - SPX bounced up 21% in four trading days.
This image has so many references I don't know where to start!
'Corona Titanic Dollar Stimulus'?
3) '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.'
Well, VIX closed above 60 every single day for the past week. Dow's intraday trading range for the past week was between 900-1600 points. I rest my case.
4) '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.'
Now this 4th point will be the one I will answer today. Using two Fib retracement models, I find some convergence at the SPX 2933 level. However, it is more likely we may see this relief rally being stopped out at the 2662 - 2791 region.
Since our local market (Straits Times Index) is a 'price taker', we will likely follow in tandem with our US big brother. STI likely resistance zone for this bounce is at 2621 - 2748.
SPX Daily, 5 mths - BOING!!
Lastly, for more info on the local market outlook, pls see attached whatsapp message to my Clients (1a to 1 d).
Conclusion in Layman's Terms:
1. I'm still very overwhelmed at my desk often with multiple live orders on my hand (so is my back office), thus order execution & time-sensitive matters are prioritized over non-urgent enquiries.
2. There was nothing much new that happened in the last 2 weeks that was not mentioned in my 15 March post.
3. I'm still of the view that the bottom is not yet in, thus the current bounce is likely, well, a bounce!
5. Relief rally will have a lot to show that the bottom is in.
6. For local market outlook, pls see attached whatsapp message to my Clients (1a to 1 d).
Live Long & Trade Well!
Thank you & rdgs
Thomas Ng, CMT
Principal Trading Representative