NASDAQ Composite (.IXIC) – Trump touts ‘biggest stock market rise in history yesterday,’ but many investors believe worst isn’t over amid coronavirus panic
That is Trump on Saturday morning, referencing the Friday surge by the Dow Jones Industrial Average DJIA, +9.36%, the S&P 500 index SPX, +9.28% and the Nasdaq Composite COMP, +9.34%, which constituted the major equity benchmarks’ biggest daily percentage gains since 2008.
Friday’s Dow gain was the largest ever on a points basis, much as Thursday, Monday and Wednesday, respectively, had delivered the blue-chip index’s largest, second largest and third largest one-day point declines.
But Friday’s rally in U.S. stocks that Trump tweeted about only recovered most of the losses suffered a day earlier, when the market saw its worst day on a percentage-loss basis since the Black Monday crash of 1987. The Dow is down about 20% from its record high. That puts it in a bear market.
‘[W]e can all agree that panic infiltrated various aspects of our lives the last few days.’— Frank Cappelleri, Instinet
Friday’s gains followed a week of unrivaled volatility across markets that elicited numerous references to the financial crisis 12 years ago and the 1987 crash, except in some ways this crisis has felt more intense and unsettling to market participants.
“Investor psychology only is clear in hindsight, but we can all agree that panic infiltrated various aspects of our lives the last few days,” wrote Frank Cappelleri, executive director of Instinet, in a research note to clients on Friday.
Indeed, all three stock indexes tumbled into bear-market territory from record heights at their fastest clips in history.
The catalyst presumably has been COVID-19, the infectious disease that was first identified in Wuhan, China, in December and has rapidly spread to more than 100 countries, infected 147,000 and claimed 5,500 lives so far, according to Johns Hopkins University.
Friday’s rally came after Trump declared a national emergency, opening up access to $50 billion in funding for states and localities to combat the coronavirus pandemic, while saying that the country was ramping up testing and expanding the ability of hospitals and doctors to provide treatments for the pandemic disease.
Focusing on Friday’s burst higher for risk assets, however, might be a mistake against the backdrop of the week’s turbulent nature. The Dow, for example, registered swings of at least 1,000 points in the week’s five consecutive sessions. Put another way, the Dow booked moves of roughly 5% or better for every trading session of the entire week.
|DATE||DOW’S POINT CHANGE FROM MARCH 9-13||DOW’S % CHANGE|
Amid those monster moves the blue-chip index saw a swift end put to the longest-running bull market in history, which, perhaps ironically, turned 11 on Monday and was effectively dead by Wednesday, as the World Health Organization elevated to pandemic status the outbreak of the disease spread by the novel coronavirus SARS COV-2.
And one measure of implied volatility on Wall Street, the Cboe Volatility Index VIX, -23.37%, saw an intraday reading on Friday that was its highest since 2008 — a period that saw it register its record level of around 80. The index, known colloquially as the “fear gauge,” has a historic average reading of 19 or 20.
Another measure of market fear, CNN’s Fear/Greed Index, hit 2 on a scale of 100, around its lowest reading in its history, with lower readings indicating more extreme fear.
The week also was marked by a seizing up of the $15 trillion Treasury market, which resulted in the Federal Reserve’s intervening. The central bank took steps to stem what it described a “unusual disruptions” in the market for U.S. government debt by injecting some $1.5 trillion into Wall Street’s key funding markets.
The rate-setting body at the Fed, the Federal Open Market Committee, is now expected to cut the federal funds rates by a full percentage point on Wednesday, March 18, at the conclusion of its two-day policy meeting. That on the heels of an emergency half-percentage-point rate cut on March 3. That first intermeeting interest-rate cut in 12 years put the target rate in a range between 1% and 1.25%.
Further action is expected from monetary-policy makers and elsewhere in government as the world attempts to curtail the substantial economic damage already being done by the coronavirus pandemic.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 8,938.86.
The projected upper bound is: 8,555.80.
The projected lower bound is: 7,150.04.
The projected closing price is: 7,852.92.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 29 white candles and 21 black candles for a net of 8 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 21.6572. This is not an overbought or oversold reading. The last signal was a buy 0 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 38.67. This is not a topping or bottoming area. However, the RSI just crossed above 30 from a bottoming formation. This is a bullish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 0 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 -124.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 9 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 15 period(s) ago.
Rex Takasugi – TD Profile
NASDAQ COMPOSITE closed up 673.073 at 7,874.875. Volume was 89% above average (neutral) and Bollinger Bands were 293% wider than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 8,329.22 9,123.02 8,422.62
Volatility: 110 55 32
Volume: 1,100,042,112 745,481,728 598,825,600
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 6.5% below its 200-period moving average and is in an downward 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 moderate flows of volume out of .IXIC (mildly bearish). Our trend forecasting oscillators are currently bearish on .IXIC and have had this outlook for the last 13 periods.