Thursday March 5th

Opening note: For a long time now I have expected a General Market top & drop, and then a bounce,  and then another leg down. The bounce would draw in the bulls emotionally, and then they may get taken to the slaughter. So far that is exactly what I see happening.

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Now that we are getting that anticipated Bounce, a few readers are beginning to ask me to change my analysis?  ” Can  this be a day 19 DCL in the General Markets?”  I would not say that, that is way too short from anything I’ve seen.  This looks like the Drop, Bounce and should be followed by a drop.

” Will we rally to new highs now that the Fed stepped in?”  If we did, I would expect it to fall short of the highs as a double top, but this is a broken market with a dead cat bounce in my opinion.

” With the Fed juice, are you now seeing maybe SPX 5000 is possible by the years end?”  Let me discuss this quickly-

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 If the charts changed from my expectations, I’d need to re-analyze it, but so far this is playing out as exactly as I expected.  Look at this Nasdaq top 2000 (again).   I feel we did a similar crash and bounce (yellow letters) , with another leg to follow.  BUlls may have become bullish on that bounce too.  If the markets show excessive strength now, I’d consider a possible ‘double top’ could happen,  but right now this is playing out exactly as I expected, so why change it?

So as a review… .

SPX – This chart was  in my weekend report. A drop, a bounce, and a drop.    Let’s see if the markets are doing anything  different ….

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SPX FEB 28–  I also said here in February that we should bounce, but then after the Bulls get drawn back in, it should be off to the slaughter. This is happening now so far.

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SPX – So far we do have the bounce.  I have said that a bounce to back test the 50 sma is not out of the question, but I honestly don’t think we will bounce as high as a ‘double top’.

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SPX –  Notice that right now we have a 50% Bounce in the SPX, and tagged the 10 sma. So far I expected that. …

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With the ‘top’ of the NASDAQ  in 1999- 2000 , we bounced slightly higher than 50% and almost to the 50 sma before rolling over again.

So I am still watching this play out and expect another leg down sooner or later.  Funny how Last week everyone on CNBC and other news venues talked about the fear of the coronavirus causing an economic change when the markets dropped, and now with this bounce, people are putting that behind them again and becoming bullish?  I haven’t commented on it much, but I will say this:

What should we expect will happen to earnings over the next few quarters with no Known Vaccine to  virus spreading as rapidly as coronavirus?    We are seeing a rapid spread of that virus progress  from country to country.  Can you imagine thousands of empty movie theaters, empty or cancelled concert halls, no filled sports stadiums and no spectators  buying tons of food & drink in those venues.  We could see empty restaurants, train stations, airlines & airports, etc . That also affects Food vendors, coffee shops, shopping malls, and more.  Now that  very well could cause the next few quarters for many many companies.  They would be seeing a big cut in profits, as people stay inside away from crowds and spend less money recreationally.

Now let me ask you…” So what if the Fed did another cut?”   It would be pretty useless under those circumstances.

So no, I really do not expect ‘SPX 5000’ by the end of the year just because the Fed did a big surprise rate cut. I expect another leg down in this market sooner or later.

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PRECIOUS METALS 

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GOLD is still standing out as different from Silver and the Miners.  With higher lows and higher highs, it can still get to new highs again.  We are only on day 3, but it paused Wednesday. As you’ll see, Silver does not look as healthy…

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SILVER crashed down Friday and is doing a bounce here. It is oversold, so I would think that it could get up to the 50 sma

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We have a good bounce going in the Miners, since we are coming out of a dcl.  This is only day 3 and GDX is back above the 50 sma and it can run higher.  As a 3rd daily cycle that failed below the 2nd, I would expect it to be L.T.,  but because GOLD did NOT fail the 2nd daily cycle low, We have a mixed picture.  THAT SAID- I am seeing stronger looking Gold stocks, weaker looking Silver stocks.

AUY got hit but started to recover.  NEM is actually back at the highs, so GDX may be dragged higher with Gold and some of these Miners are recovering. However…

PAAS is a silver stock trying to recover too, but if you have time, look at a 1 yr chart of EXK, AG, FSM, CDE, etc. Those silver stocks are in need of repair and it may take until the next ICL to smooth those charts out.  We’ll see.

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Even AG , a silver stock making new highs in January, has crashed and may need time ( The next ICL in May or so?) to repair the damage.  Some longer term bulls may actually want to buy this with a stop, because this may be a low that holds for years.  It may also be retested at the next ICL, so keep that in mind.

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I was Stopped out of 1/2 of my SQQQ, strictly for discipline purposes.  I bought one order near $20.50 and then added later near $21.  I had a tight stop on what I added, but a loose stop on my original purchase.   If the NASDAQ 50 sma is back tested, SQQQ would drop too far from my original entry, but I still think that we are just seeing General Markets bouncing here and I will be adding to the short again. I also own a few miners and a few biotech stocks. We are day 3 of a 3rd daily cycle and that allows some to trade the miners.  I took small position at the reversal candle, but it will be short term and stops would be raised.   Some Miners may be putting in lows and longer term buyers could add, but I see an ICL ahead, and those are always the nest buying opportunity for that sector.

It has been tricky trading, and some may just want to stay on the sidelines and wait for clearer trade entries. I may start showing more biotech trade set ups too, since they held up better during the sell off.  Enjoy your Thursday trading!

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~ALEX