{"id":166825,"date":"2020-03-18T15:10:03","date_gmt":"2020-03-18T19:10:03","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=166825"},"modified":"2020-03-18T15:10:03","modified_gmt":"2020-03-18T19:10:03","slug":"four-key-questions-to-this-crisis-everyone-is-asking","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/03\/four-key-questions-to-this-crisis-everyone-is-asking\/","title":{"rendered":"Four Key Questions To This Crisis Everyone is Asking"},"content":{"rendered":"
March 18, 2020<\/div>
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By TheTechnicalTraders<\/u><\/a><\/strong>\u00a0– Recently, I was asked to participate in a live radio talk with Arnold Gay and Yasmin Wonkers at Money 89.3 Asia First<\/a> and was sent the following questions to prepare for the show.\u00a0 I thought this would be a great way to share my thoughts and expectations related to the Covid-19 virus, global economics and what the Central Banks are doing to combat this virus economic event.<\/p>\n

The reality is that the bottom in the markets won\u2019t set up until fear subsides and the unknowns related to this virus event are behind us.\u00a0 Until then, the global markets will attempt to seek out the true valuation levels based on this fear and the unknowns.\u00a0 This means true valuation could be much further away from current price levels as the virus event is still very fluid in nature.<\/p>\n

I\u2019ve included a few of our custom index charts to highlight exactly where the markets are currently situated and have attempted to explain my thinking related to these charts.\u00a0 Please continue reading.<\/p>\n

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

Custom Smart Cash Index Weekly Chart<\/h3>\n

This first chart is our Custom Smart Cash Index Weekly Chart.\u00a0 We had been expecting a breakdown in the US stock market last August\/September 2019 (near the origination point of the line on the RSI pane) as our Super-Cycle system indicated a major breakdown was likely near the end of 2019 and into early 2020.<\/p>\n

As the US Fed started pumping credit into the Repo market and the US\/China trade deal settled over many months, a zombie-like price rally pushed prices higher through December 2019 and into early 2020.\u00a0 We alerted our members that this was likely a blow-off rally and to prepare for greater risks.<\/p>

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You can see how dramatic the change in trend actually is on this chart.\u00a0 We have broken the upward sloping price channel and moved all the way to the lower range of the GREEN downward sloping price channel.\u00a0 This is HUGE.\u00a0 Near these levels, we believe the US stock market will attempt to find support while continuing to rotate and setup additional \u201cwaterfall downside price events\u201d.\u00a0 These custom indexes help us to understand the \u201chidden side\u201d of the market price action.<\/p>\n

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Chart by TradingView<\/a><\/p>\n

Weekly Custom US Stock Market Index<\/h3>\n

This next Weekly chart is the Custom US Stock Market Index and we want you to pay very close attention to the fact that the recent lows have come all the way down to reach the upper range of the 2016 trading range.\u00a0 Once the 2018 lows were breached, we knew the markets were setting up for a deeper downside price move.<\/p>\n

We do believe this current level is likely to prompt some type of \u201cDead Cat Bounce\u201d or moderate support though.\u00a0 The entire range of 2016 (low, midpoint and high) are very much in play right now as these represent the current support levels for the US stock market.\u00a0 We do believe some moderate support will be found near these levels \u2013 yet we have to wait for the price to confirm this bottom setup.<\/p>\n

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Chart by TradingView <\/a><\/p>\n

Weekly Custom Volatility Index<\/h3>\n

This is our Weekly Custom Volatility Index and the extremely low price level on this chart suggests the US stock market may attempt to try to find moderate support soon.\u00a0 We have not seen levels this low since 2009.\u00a0 If the markets continue to push lower, this Custom Index will continue to stay below 6.0 as the price continues to decline.\u00a0 Yet, we believe this extremely low price level may set up a bit of support near recent lows (within the 2016 range) and may set up a sideways FLAG formation before the next downside price leg.<\/p>\n

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Chart by TradingView <\/a><\/p>\n

Please continue reading the questions (below) and answers\/thoughts to those questions (below the questions).\u00a0 We certainly hope this information helps you to understand and prepare for the next 6 to 12+ months as we believe the volatility and unknowns will persist for at least another 4 to 6+ months. But keep in mind the market dynamics change on a daily and weekly basis and if you want to safely navigate them and have a profitable year follow my analysis and ETF trades here<\/strong><\/p>\n

Questions:<\/h3>\n

1. Rates at zero, massive injections and coordinated central bank action\u2026 why isn\u2019t the market convinced the situation is under control?<\/p>\n

2. What are investors looking for now \u2013 A peak in coronavirus infection rates? A sense that a proper healthcare response is in place and won\u2019t be overwhelmed?<\/p>\n

3. The main issue seems to be that this is not a slowdown, but the sudden closure of economic activity, do you see massive fiscal support coming, including bailouts for sectors like airlines?<\/p>\n

4. Do you get a sense that the White House finally gets it, and is now moving to reassure markets and ordinary Americans?<\/p>\n

Answers\/Thoughts:<\/h3>\n

The markets are not reacting to what the global central banks are doing right now and probably won\u2019t react positively until two things happen: fear of the unknown subsides across the globe and the total scope of the global economic destruction is assessed (think of this as TRUE PRICE VALUATION).\u00a0 Right now, we are in the midst of a self-actuating supply and demand-side economic contraction that will result in a renewed valuation level as markets digest the ongoing efforts to contain\/stop this virus.\u00a0 Where is the bottom, I have an idea of where the bottom might setup \u2013 but the price will be what dictates if that becomes true.<\/p>\n

If 2018 lows fail to hold as a support level, then we are very likely going to attempt to reach the 2016 trading range and I believe the midpoint and low price range of 2016 are excellent support levels for the market. I show the SP500, Nasdaq and Dow Jones index analysis and prediction in this video below.<\/p>\n