{"id":164102,"date":"2020-01-29T15:55:43","date_gmt":"2020-01-29T20:55:43","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=164102"},"modified":"2020-01-29T15:55:43","modified_gmt":"2020-01-29T20:55:43","slug":"are-we-setting-up-for-a-waterfall-selloff","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/01\/are-we-setting-up-for-a-waterfall-selloff\/","title":{"rendered":"Are We Setting Up For A Waterfall Selloff?"},"content":{"rendered":"
January 29, 2020<\/div>
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By TheTechnicalTraders<\/u><\/a><\/strong>\u00a0– Most traders understand what a \u201cWaterfall event\u201d is if you\u2019ve been trading for more than 3 years.\u00a0 Nearly every downside price reversion event initiates in a breakdown event (the first tier of the waterfall event) which is followed by additional deeper waterfall price collapses.\u00a0 Almost like price breaks lower, finds support, settles near support, then breaks lower targeting deeper price support levels.<\/p>\n

SPY Daily Chart<\/h3>\n

This example SPY chart from October 2018 through December 2018 highlights this type of event almost perfectly.\u00a0 With each tier in the waterfall event, price searches for new support levels as price weakness drives price lower throughout each breakdown event.\u00a0 We\u2019ve highlighted these breakdown events with the MAGENTA lines drawn on this chart.<\/p>\n

The recent downside price rotation after the world was alerted to the Wuhan virus presented a very clear \u201cfirst-tier\u201d waterfall event.\u00a0 This first move lower is often rather condensed in size and scope \u2013 yet often within days of this first event, a bigger second downside waterfall event takes place confirming the bearish breakdown has momentum.\u00a0 We believe this first move lower could be the first real tier in a broader global market waterfall event which may result in a much deeper price reversion event.<\/p>\n

We believe the total scope of the Wuhan virus will not be known for at least another 20 to 30+ days.\u00a0 After that span of time, we\u2019ll know where and how aggressive this pandemic event has spread and what real capabilities we have for containment.\u00a0 Therefore, we believe the downside price concern within the global markets is very real and just starting.<\/p>\n

Very much like what happened in October 2018, the initial downside price move initiated on the US fed news and expectations.\u00a0 When the Fed announced a rate cut, which shocked the markets, investors waited to see how the markets would react and within only 5+ days, the markets reacted violently to the downside.<\/p>\n

Friday, January 24 was the \u201ctrigger date\u201d for the breakdown in global markets from the news of the Wuhan virus.\u00a0 We believe any further downside risk to the global markets will be known within another 5 to 10+ trading days \u2013 as more information related to the spread and containment capabilities of the virus are known.\u00a0 Therefore, we are attempting to alert our followers and friend to the very real potential of a price breakdown event, a \u201cWaterfall Event\u201d, that may be set up in the global markets.<\/p>

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Daily Transportation Index Chart<\/h3>\n

This Daily TRAN chart highlights the recent breakdown in price that could be considered the first tier of the waterfall event.\u00a0 The support level, highlighted in LIGHT BLUE, suggests price may attempt to stall near 10,800 before any further price breakdown happens.\u00a0 A second waterfall tier could push the price well below the 10,000 level as the next real support exists near 9,9250.<\/p>\n

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Daily 400 Midcap Index Chart<\/h3>\n

This Daily MC (S&P 400 MidCap) futures chart highlights a similar price pattern.\u00a0 The initial breakdown tier is very clearly illustrated where the price fell to immediate support near 2050.\u00a0 We believe any further waterfall tier even may push the price below the 2000 level and target real support near 1952.<\/p>\n

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Daily Financial Sector Index Chart<\/h3>\n

This XLF (Financial Sector SPDR ETF) Daily chart, again, highlights the first tier breakdown in the price of the potential Waterfall event.\u00a0 This is actually one of the clearest examples of how price operates within this type of rotation.\u00a0 The initial downside tier broke through support near $30.00 and has begun to rally back above this level.\u00a0 The LIGHT BLUE highlighted support range shows us where the first tier may stall.\u00a0 Any further breakdown in price may push the price below the $28.50 level as price searches for new support.<\/p>\n

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We\u2019ve referenced the 1855 \u201cThird Plague Event\u201d that hit in China and quickly spread to India, SE Asia, and other neighboring countries as an example of what may happen with the Wuhan virus.\u00a0 The 1855 event killed over 15 million people (nearly 1.25% of the total global population at the time) and lasted until 1960 when the Plague cases dropped below 200.<\/p>\n

We urge all traders and investors to prepare for a broader downside market event in the future \u2013 possibly a \u201cwaterfall event\u201d.\u00a0We\u2019ll know more about the size and scope of this potential pandemic within 30+ days \u2013 but this may become a much bigger issue across the globe very quickly.\u00a0 The volatility this event may create in the global markets is an ideal setup for skilled technical traders.\u00a0 In the last week, we locked in profits on two trades SSO for 6.5% and TLT for 3%. Learn how we can help you find and execute great trades related to this wildly volatile event.<\/p>\n

Join my\u00a0ETF Trade Alert Newsletter \u2013 Wealth Building Newsletter<\/strong>\u00a0if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.<\/p>\n

Chris Vermeulen
\nTheTechnicalTraders.com<\/u><\/a><\/strong><\/p>\n

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.\u00a0 It is provided for educational purposes only.\u00a0 Our research team produces these research articles to share information with our followers\/readers in an effort to try to keep you well informed.\u00a0 Visit our web site to learn how to take advantage of our members-only research and trading signals.<\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

By TheTechnicalTraders\u00a0– Most traders understand what a \u201cWaterfall event\u201d is if you\u2019ve been trading for more than 3 years.\u00a0 Nearly every downside price reversion event initiates in a breakdown event (the first tier of the waterfall event) which is followed by additional deeper waterfall price collapses.\u00a0 Almost like price breaks lower, finds support, settles near […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-164102","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/164102","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=164102"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/164102\/revisions"}],"predecessor-version":[{"id":164103,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/164102\/revisions\/164103"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=164102"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=164102"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=164102"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}