Is the market preparing for a significant fall?
Atualizado
The fall started from the Nasdaq (tech stocks) index, passed to the Russell index (small caps) and now
it seems to spread across the whole market.
The overall market’s index DSIR is below its 30d and 50d SMAs and shows large bearish divergences
whilst its MACD gave a strong sell signal.
IXIC, FAANGT and RUT are below both their 30d and 50d SMAs, SPX it’s below its 30d SMA and DJI it’s
below its 9d SMA.
The MACD indicators of DJI, SPX, IXIC and RUT have given sell signals.
Investor portfolios with Nasdaq and Russell 2000 stocks are already recording significant losses.
Stocks fall easily when investors sell to get their profits (or their losses) but climb hard because
investors have to put fresh money into the market to raise them.
John Murphy says: “A market can fall just from inertia. Lack of demand or buying interest on the
part of traders is often enough to push a market lower; but a market does not go up on inertia.
Prices only rise when demand exceeds supply and buyers are more aggressive than sellers”.
Because all falls end in panic and panic yet we have not seen, it is very likely that the fall will soon
accelerate and spread throughout the whole market.
Prompt: New traders should take some time and carefully read the post entitled 'You can't beat the market' that is located in my profile.
Disclaimer
The author of this text is not an investment advisor. The preceding content is intended to be used for informational and educational purposes only.
It is not an advice or inducement for the purchase or sale of the products mentioned. Before making any investment based on your own personal circumstances,
it is very important to do your own research and analysis and also take independent financial advice from a professional to verify any information provided here.
it seems to spread across the whole market.
The overall market’s index DSIR is below its 30d and 50d SMAs and shows large bearish divergences
whilst its MACD gave a strong sell signal.
IXIC, FAANGT and RUT are below both their 30d and 50d SMAs, SPX it’s below its 30d SMA and DJI it’s
below its 9d SMA.
The MACD indicators of DJI, SPX, IXIC and RUT have given sell signals.
Investor portfolios with Nasdaq and Russell 2000 stocks are already recording significant losses.
Stocks fall easily when investors sell to get their profits (or their losses) but climb hard because
investors have to put fresh money into the market to raise them.
John Murphy says: “A market can fall just from inertia. Lack of demand or buying interest on the
part of traders is often enough to push a market lower; but a market does not go up on inertia.
Prices only rise when demand exceeds supply and buyers are more aggressive than sellers”.
Because all falls end in panic and panic yet we have not seen, it is very likely that the fall will soon
accelerate and spread throughout the whole market.
Prompt: New traders should take some time and carefully read the post entitled 'You can't beat the market' that is located in my profile.
Disclaimer
The author of this text is not an investment advisor. The preceding content is intended to be used for informational and educational purposes only.
It is not an advice or inducement for the purchase or sale of the products mentioned. Before making any investment based on your own personal circumstances,
it is very important to do your own research and analysis and also take independent financial advice from a professional to verify any information provided here.
Nota
After Friday’s close the technical picture of market’s indexes is the following:1) Daily charts:
• IXIC, FAANGT and RUT are still below both their 30d and 50d SMAs whilst DJI, SPX and DSIR are now above their 30d and 50d SMAs.
• The MACD indicators of DSIR, DJI, SPX, IXIC and RUT maintain their sell signals.
2) Weekly charts:
The market’s course the next week will probably reveal whether the smart money really wants to reverse the fall and start a new up-leg.
The known market’s fundamentals do not support more rising move but may be the smart money knows more…
S&P 500 has a trailing 12-months P/E ratio 33 whilst the 10-years average is 18.4 and a forward 12-months P/E ratio 21.6 whilst the 10-years average is 15.9 (source: Factset.com).
For Q1 2021, the estimated earnings growth rate for the S&P 500 is 23.3% and maybe the smart money will want to capitalize this rise.
I’ll be happy to consider that the falling course is reversed if all the indexes go above their 30d and 50d SMAs and stay there for more than 2 days and simultaneously all their MACD indicators give a buy signal.
In any case we must be cautious and our stock placements have to be careful and conservative at these levels.
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