Technicals | Mar 17 2020
By Michael Gable
Any bounces so far in the market have not lasted for more than a day. At some point of course, the bulk of the selling will be over and the market will try to establish the levels that it is happy to rally from. This will result in large rallies that last at least a few days. It could see stocks move 20% from their lows. This will then be followed by selling pressure as investors use those rallies to cash up a bit more. This is likely to go on for months. Even just sticking with blue-chips only when buying and selling these moves could be very profitable for those that are nimble. At some point the daily ranges will settle down and that is often the first sign that the market will be ready to trend again. It is something we are always looking for but that is likely to be a while away.
In this week's report we have a chart of the S&P 500 Index. Do support levels mean much in a fast-moving market? Have a look at our commentary. And although we are not saying that everyone needs to buy in right now, the market is very dangerous, but don't be surprised if the first multi-day relief rally may start from this level. But the situation is very fluid and changes daily or even hourly.
The market is dangerous here but we can't help but notice that the US market is retesting its 2018 lows (horizontal line). The current decline is also sitting at the 38.2% Fibonacci retracement of the entire rally that started in 2009. Overnight's movements have also dumped the index to just below the long-term trend line that started back in 2009. This often leads to a snap-back where it could try to push higher and revert back above that trend line. That is, any bounces will need to quickly overcome the 2,500 level.
It may well fail of course and then that would mean that we are heading lower again. Often the worst market days occur at the lows as investors capitulate. It felt like that a week ago, but records are made to be broken so now last night's movement is the worst decline since this all started. For the moment though, the S&P 500 Index is poised at a very interesting technical level and it would be extremely encouraging to see it move higher from here. A failure would see it head towards the next support level near 2,030.
Content included in this article is not by association the view of FNArena (see our disclaimer).
Michael Gable is managing Director of Fairmont Equities (www.fairmontequities.com)
Fairmont Equities is a share advisory firm assisting Private Clients with the professional management of their share portfolio. We are based in the Sydney CBD but provide services to private clients across Australia. We believe that the concepts of fundamental analysis and technical analysis of stocks are not mutually exclusive. Regardless of whether you are a trader or long term investor, combining both methods is crucial to success. As a result, the unique analysis of Fairmont Equities is featured regularly in the media such as Sky News Business, CNBC, The Australian Financial Review, and the ASX newsletter. Contact us for a free trial of our research and information on our portfolio management services.
Michael is RG146 Accredited and holds the following formal qualifications:
• Bachelor of Engineering, Hons. (University of Sydney)
• Bachelor of Commerce (University of Sydney)
• Diploma of Mortgage Lending (Finsia)
• Diploma of Financial Services [Financial Planning] (Finsia)
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2
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Disclaimer
Fairmont Equities Australia (ACN 615 592 802) is a holder of an Australian Financial Services License (No. 494022). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.
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