NASDAQ Composite (.IXIC) Faces Trouble in August
This is the trap awaiting the stock market ahead of a grim summer
This year is shaping up exactly like the 2000 dot-com bubble crash and stocks will drop a further 40%, Shayne Heffernan, CEO and Founder of Heffx warns.
April produced the best monthly gains for the Dow Jones Industrial Average and S&P 500 in 82 years — after the worst first quarter in history — and May has so far got off to a bad start.
Shayne Heffernan said the rest of the year looked even worse for stocks, predicting a 40% drop over next few months and then rally the rest of 2020.
Shayne Heffernan Trade Idea
“The Nasdaq in 2000 did a similar bear market bounce as stocks this year — dropped 40%, then bounced 42% off the bottom retracing 61.8% of its drop. It stalled then fell 43%, making a new low four months later. The presidential election on the horizon, as it was in 2000, creates further risk and uncertainty, while retail participation and leverage was near the 2000 bubble level.”
The NASDAQ will do better than the Dow this time and the recovery will be Tech led.
Finally, the fact Warren Buffett was hoarding a “record amount of cash,” as he did in 2000, was another sign of what’s to come, he said.
Beyond my reasoning for the call, you should be building up as big a savings buffer as possible to weather a job loss or reduced income.
“Downsize your house if you can. With mortgage rates at record lows and with summer upon us, we’ll likely get a quick ‘dead cat bounce’ in the housing market.
“Anything liquid and of value, sell now: art, coins, handbags, stamps, extra cars.” People should go to cash in retirement accounts if possible and reduce non essential spending, such as dining out.
Why This Matters
If policymakers don’t make up for the shortfall in spending from the private sector, the excess savings will flow away from the skimpy rates offered by European debt to the richer yields offered by the U.S. bond market.
As a recipient of these inflows, Treasury yields would grind lower until they plunged into subzero levels, while its corporate bonds, collateralized loan obligations and other debt instruments would see prices rise.
Moreover, it wouldn’t take a significant rally to reach what many investors have deemed an unthinkable floor. The 10- year Treasury note yield stands at 0.64%, more than a percentage point down from the 1.91% seen at the end of last year.
“That’s a huge risk hanging over everything. If Europe goes in that direction, U.S. rates will end up being negative, without a doubt in my mind.” Shayne Heffernan PhD in Economics
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 6,765.24.
The projected upper bound is: 9,967.53.
The projected lower bound is: 7,855.15.
The projected closing price is: 8,911.34.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 37 white candles and 13 black candles for a net of 24 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 57.4531. This is not an overbought or oversold reading. The last signal was a sell 3 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 59.70. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 3 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 74. This is not a topping or bottoming area. The last signal was a sell 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 2 period(s) ago.
Rex Takasugi – TD Profile
NASDAQ COMPOSITE closed down -57.456 at 8,832.095. Volume was 83% below average (consolidating) and Bollinger Bands were 59% wider than normal.
Open High Low Close Volume 8,681.291 8,841.211 8,537.829 8,832.095 1,774,445,824
Technical Outlook Short Term: Neutral Intermediate Term: Bullish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 8,503.27 6,996.76 3,883.29 Volatility: 123 89 93 Volume: 12,964,729,856 11,005,616,128 10,440,189,952
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
NASDAQ COMPOSITE is currently 127.4% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods.
There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of .IXIC at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .IXIC and have had this outlook for the last 44 periods.
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