{"id":166432,"date":"2020-03-13T06:33:10","date_gmt":"2020-03-13T10:33:10","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=166432"},"modified":"2020-03-13T06:34:00","modified_gmt":"2020-03-13T10:34:00","slug":"wheres-the-bottom-the-question-everyone-is-asking","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/03\/wheres-the-bottom-the-question-everyone-is-asking\/","title":{"rendered":"Where\u2019s the Bottom? – The Question Everyone Is Asking"},"content":{"rendered":"
March 13, 2020<\/div>
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By TheTechnicalTraders<\/u><\/a><\/strong> – Has the selloff ended?\u00a0 When will it end?\u00a0 What will the bottom look like and am I at risk of taking further losses?\u00a0 What should I do?<\/p>\n

Do you want to take a guess at how many of our friends and family members are calling us over the past week or so asking these questions?\u00a0 Personally, I get bombarded with dozens of emails every day from friends and other family members asking \u201cwhere\u2019s the bottom?\u00a0 What should I do?\u201d.<\/p>\n

This post is going to help you understand the structure of the markets and what is really happening.\u00a0 Price always attempts to seek out new price highs or new price lows.\u00a0 In this case, we are seeking out new price lows with a downside price rotation.\u00a0 Price structure, which is normally discussed in Elliot Wave structures is the process of setting up new higher high or lower low waves as price rotates in a defined wave structure.\u00a0 Keep in mind the broader wave structure that is currently unfolding.<\/p>\n

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Over the past 16+ months, we\u2019ve suggested that the price rotation in 2018 was a Wave 4 downside price rotation of a Wave C upside price structure.\u00a0 If our analysis is correct, the last rally we just experienced (ending near February 1, 2020) was the end of a Wave 5 upside price move that completed the Wave C upside price structure.\u00a0 This would indicate a very real possibility that the current downside price trend is a Wave 4 downside price move.<\/p>\n

Be sure to\u00a0opt-in to our free market trend signals newsletter<\/strong>\u00a0before closing this page so you don\u2019t miss our next special report!<\/p>\n

For readers that are not familiar with the Elliot Wave process\/structure, each major wave (1 through 5 or A through C) can consist of various types of minor wave structures (as you can see from the middle chart in the example above.\u00a0 The major wave 1 could consist of a 5 wave minor wave structure (as shown).\u00a0 The major wave 2 could consist of a 3 wave minor wave structure (as shown) or even a downside 5 wave structure.<\/p>

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Going even further, each of these minor wave structure could consist of even smaller price wave structures.\u00a0 These types of price rotations often populate in 1, 3, 5, 7, 9, 13 and 21 wave structures.\u00a0 Unlocking the major wave count and minor wave count can help us unlock swing trading and day trading opportunities.<\/p>\n

So, to put into context what we are attempting to convey to you is that we believe the peak in early February 2020 was the end of a major wave 3 and the start of a major wave 4 (to the downside).\u00a0 Because the upside price wave 3 originated after the 2009-10 price bottom, we believe true support in the markets is likely the midpoint of the 2018 price rotation range or near the low price levels of 2018.\u00a0 These price levels represent a very clear support level and low price target level that continues to follow the price structure rules of Fibonacci and Elliot Wave.\u00a0 If the 2018 lows are breached and the markets continue to push lower, then we fall back to the 2016 price lows and midpoint level.<\/p>\n

Weekly YM Chart \u2013 DOW JONES<\/h3>\n

This Weekly YM chart highlights the two lower MAGENTA lines that we believe represent clear price support for the Dow Jones (24,000 & 21,450).\u00a0 At this point, the YM has already moved below the 24,000 level and closed trading on Monday, March 9, near 23,900.\u00a0 Although this price level has breached the 24,000 level, we do not consider \u201csupport\u201d a hard level (like concrete).\u00a0 It is like water in many cases and it matters what price does when it reaches this level.\u00a0 If price finds support near this level, it will begin to bottom out and potentially trade sideways before attempting to move higher.\u00a0 If not, the price may stall near this 24,000 level before breaking down to the 21,450 level (or lower).<\/p>\n

We do believe the INDU\/YM will put in a bottom before the ES and NQ do.\u00a0 Thus, we believe support will be found in the INDU\/YM well before support is found in the other major US stock market indexes.<\/p>\n

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SPY Weekly Chart \u2013 S&P 500<\/h3>\n

This SPY Weekly chart highlights the same setup with the two MAGENTA lines we\u2019ve drawn.\u00a0 The first level of support for SPY is $261~$262.\u00a0 We believe this midpoint of 2018 high to the low trading range will offer a fairly strong support level for the SPY to attempt to set up a price bottom.\u00a0 Below that, the $234 level (the lower range of the 2018 trading year) would provide very clear support for the SPY.<\/p>\n

The same type of price theory and expectations are at play on this chart as with the YM chart above.\u00a0 The YM has already reached our first level of support, yet the SPY is still $12 away from this first support level.\u00a0 This would suggest the YM may begin to set up some type of price support while the SPY may continue to trail a bit lower over time.<\/p>\n

If this first level of support does not hold, then we would be looking for the 2018 price low levels (near $234) to become the next target for support.\u00a0 Ultimately, the price must either continue to attempt to break previous low price points as it attempts to establish \u201cnew price lows\u201d or, at some point, it will fail to break past lows and that is where it will find support.\u00a0 The midpoint, often called the \u201cbelt line\u201d (a Japanese Candlestick term) is used by technicians for two reasons: first, it represents 50% of a defined price range and, second, Japanese Candlestick theory teaches us the BeltLine is \u201cthe center of control\u201d or price.\u00a0 Once price breaks this level, then further trending may continue.<\/p>\n

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NQ Weekly Chart \u2013 NASDAQ<\/h3>\n

Lastly, this NQ Weekly chart with the three MAGENTA lines drawn on it.\u00a0 The top line is the 2018 price peak level.\u00a0 The middle line is the midpoint of the 2018 trading range.\u00a0 The lower line is the bottom of the 2018 trading range.<\/p>\n

The NQ has been the high-flying sector in the US stock market for many months.\u00a0 You can see the massive rally that took place near the end of 2019 pushing the NQ up to nearly 10,000 before the recent correction.\u00a0 Compared to the YM and SPY charts, it is easy to see the NQ rallied much stronger than the others.\u00a0 This is why we believe the downside price move in the NQ could also be far greater in scope than the YM or SPY.<\/p>\n

If the NQ falls to our midpoint level (near 6795), the NQ must call another -1100 points to reach this level.\u00a0 Whereas the YM has already reached this critical price level and the SPY is only about $12 away from that same level.\u00a0 Therefore, the NQ, in our opinion, could continue to trend broadly lower throughout Q1 and possibly into Q2 before finding any real support.<\/p>\n

The low price range of 2018 puts final support for the NQ near 5,832.\u00a0 From current levels, if price falls to this support level, it would total an additional -2066 point decline (-26.11%).\u00a0 It would also represent a massive -40% selloff from the peak set in February 2020 (near 9763).<\/p>\n

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Where\u2019s the bottom?\u00a0 What\u2019s next?\u00a0 Our advice would be NOT to chase this selloff and NOT to attempt to bottom pick this move.\u00a0 We believe the Covid-19 virus event will last well past April\/May 2020 and we believe both Q1 and Q2 results will be far below expectations.\u00a0 Therefore, we don\u2019t believe any real bottom will setup before May, June or July of 2020 \u2013 after Q2 earnings are announced and contingent on the virus event subsiding and earnings starting to recover.\u00a0 Otherwise, we could be \u201csearching for a bottom\u201d for quite a while yet.<\/p>\n

Still, massive price rotations are taking place in the major markets and various sectors.\u00a0 If you are a skilled trader and are able to manage risk properly, you should be able to identify multiple opportunities over the next 90+ days for incredible trades.\u00a0 We know we certainly are finding them.<\/p>\n

As a technical analysis and trader since 1997, I have been through a few bull\/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.<\/p>\n

Visit my\u00a0ETF Wealth Building Newsletter<\/strong>\u00a0and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.<\/p>\n

Chris Vermeulen<\/p>\n

TheTechnicalTraders.com<\/u><\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

By TheTechnicalTraders – Has the selloff ended?\u00a0 When will it end?\u00a0 What will the bottom look like and am I at risk of taking further losses?\u00a0 What should I do? Do you want to take a guess at how many of our friends and family members are calling us over the past week or so […]<\/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-166432","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/166432","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=166432"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/166432\/revisions"}],"predecessor-version":[{"id":166434,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/166432\/revisions\/166434"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=166432"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=166432"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=166432"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}