{"id":171588,"date":"2020-06-03T08:32:41","date_gmt":"2020-06-03T12:32:41","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=171588"},"modified":"2020-06-03T08:16:59","modified_gmt":"2020-06-03T12:16:59","slug":"us-stock-market-sets-up-technical-patterns-pay-attention","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/06\/us-stock-market-sets-up-technical-patterns-pay-attention\/","title":{"rendered":"US Stock Market Sets Up Technical Patterns – Pay Attention"},"content":{"rendered":"
June 3, 2020<\/div>
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By TheTechnicalTraders<\/u><\/a>\u00a0<\/strong><\/p>\n

– The recent \u201cmelt-up\u201d in the US stock market after a moderate downside price move in early May 2020 has set up a number of technical patterns that traders need to pay attention to.\u00a0 This melt-up trend may continue for a bit longer, but price levels and actions are beginning to set up very clear patterns that warn of potential weakness in the future.<\/p>\n

First, no matter how we attempt to spin the data, the US economy is very likely to fall into a moderate recession after the COVID-19 virus event has created a world-wide economic event and the recent riots and protests all across the US continue to disrupt and destroy property, businesses, and other assets.<\/p>\n

It is almost like a one-two-three series of punches leading to a TKO.\u00a0 We have the virus event, the stay-at-home orders, and now the riots and protests.\u00a0 Recently, the National Guard has been called out to support local law enforcement and to protect people and properties. From our perspective, the situation is very far away from stable economic activity\/growth supporting current stock price activity\/levels.<\/p>\n

We have been urging our friends and followers to be very cautious of long-side trades and to execute them with very narrow parameters, minor position sizes, and easy\/tight targets and stops.\u00a0 The reason for this is because we are not confident that the underlying global economic fundamentals support the current price trends and activities.\u00a0 Yes, the US Fed is pouring trillions into the economy attempting to support the US and global markets, but the view from the ground level is very different from the Wall Street office on the 20th<\/sup> floor.<\/p>\n

The GDP-Based Recession Indicator Index has risen to the highest levels since Q1:2008 as of April 2020 data.\u00a0 If it continues higher with the May 2020 data point, we\u2019ll have more evidence that the US economy has entered the early stages of an economic recession.\u00a0 Remember, in early 2008, the US stock market had already begun to collapse more than 20% from recent highs.\u00a0 Currently, the SPY is trading only -9.63% below the all-time high levels.\u00a0 Our researchers continue to believe the US stock market is overvalued by at least 11% to 15% at current levels.<\/p>

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GDP-Based Recession Indicator Index<\/strong><\/h3>\n
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We continue to urge technical traders to be very cautious of the potential \u201cwashout-high\u201d price pattern that is setting up and we continue to urge our followers to be very selective of active long trades.\u00a0 There is money to be made in this trend and certain sectors and symbols have rallied 10 to 15% over the past 4+ weeks \u2013 but technical traders need to be very aware of the active risks still playing out in the markets.<\/p>\n

Before we continue, be sure to\u00a0opt-in to our free market trend signals<\/strong><\/a>\u00a0<\/em>
\nbefore closing this page, so you don\u2019t miss our next special report!<\/em><\/p>\n

This Daily YM (Dow Jones E-Mini Futures Chart), highlights the major resistance levels near current price highs.\u00a0 The first, the MAGENTA line originates from our Adaptive Fibonacci Price Modeling system and is a key target\/price level originating from the all-time price peak level.\u00a0 The reason this level is so important is that it continues to reflect the prominent downside price move\/trend and this key Fibonacci level is still active until it is breached by price moving\/closing above this level.<\/p>\n

Second, the current Adaptive Fibonacci Price modeling system trigger level is highlighted in YELLOW.\u00a0 This level is going to act as a \u201ctrigger point\u201d in price.\u00a0 If price rallies above this level and closes above this level, then we may see more upward price activity over the next few days\/weeks.\u00a0 If price fails to close above this level and stays below this level, then we interpret this as a failure to achieve the trigger level and it would suggest that price may begin to move downward \u2013 away from this critical price trigger level.<\/p>\n

Watch for the YM to move to levels near or above 25,600 and watch how it reacts to this key resistance level.\u00a0 If it rallies above this level then fails and begins to move dramatically lower \u2013 this level is being rejected and a new bearish trend may setup.\u00a0 If it moves above this level and closes above this level, then we have confirmation of a potential upside price trend and bullish trending may continue for a bit longer.<\/p>\n

DOW JONES E-MINI FUTURES DAILY CHART<\/strong><\/h3>\n
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This next Weekly chart, the IWM (Ishares Russell 2000 ETF), highlights another key technical pattern \u2013 a Gap Fill.\u00a0 We\u2019ve been watching how capital has transitioned from the NASDAQ and S&P500 and into the Mid-Caps and other sectors over the past 4+ weeks.\u00a0 Once the major indexes began to reach levels near the past all-time highs, capital began seeking out undervalued sectors and technical traders began rotating into these sectors expecting a moderate price rally to occur.<\/p>\n

Not that the Russell 2000 has rallied up to fill this gap, it is very likely that some level of moderate price weakness will setup \u2013 possibly pushing price levels lower.\u00a0 A Gap Fill is a technical pattern that suggests any Gap in price will eventually get filled by future price activity.\u00a0 Once this Gap is Filled, the price has completed a technical pattern to \u201cfill the void\u201d.\u00a0 After the Gap is filled, price usually stalls and moves in the opposite direction for a period of time \u2013 establishing a new base for a new momentum move.<\/p>\n

We believe the filling of the GAP on this IWM chart suggests the Mid-Caps may have reached a key resistance level and may begin to move downward in the near future \u2013 likely attempting to establish a new momentum base near the $122 level.<\/p>\n

IWM \u2013 ISHARES RUSSELL 2000 ETF WEEKLY CHART<\/strong><\/h3>\n
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We love this market volatility and how various sectors are rotating right now.\u00a0 It presents incredible opportunities to be able to select new trades.\u00a0 We are still being very cautious overall with our portfolio.\u00a0 We\u2019ve been able to achieve new highs in our accounts by selectively trading various symbols and targeting exit points using our proprietary trading technology.\u00a0 Right now, we have two active trades that continue to generate solid profits.\u00a0 No reason to go crazy trying to pick dozens of trades with our \u201cBest Asset Now\u201d modeling system.\u00a0 It allows us to attempt to stay active while trading the best asset class in the markets.<\/p>\n

Watch how the markets react this week and early next week.\u00a0 We recently posted a research article about the US Presidential cycle and how June\/July is often very difficult months in an election year.\u00a0 You may find this research article very informative as we push forward into the Summer months of this 2020 election hear<\/p>\n

Election Year Cycles \u2013 What To Expect?:<\/strong> https:\/\/www.thetechnicaltraders.com\/election-year-cycles-what-to-expect\/<\/a><\/p>\n

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my\u00a0Active ETF Trading Newsletter<\/a><\/strong>.<\/p>\n

If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my\u00a0Long-Term Investing Signals<\/a><\/strong>\u00a0which we issued a new signal for subscribers.<\/p>\n

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
\nChief Market Strategies
\nFounder of Technical Traders Ltd.<\/p>\n

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

By TheTechnicalTraders\u00a0 – The recent \u201cmelt-up\u201d in the US stock market after a moderate downside price move in early May 2020 has set up a number of technical patterns that traders need to pay attention to.\u00a0 This melt-up trend may continue for a bit longer, but price levels and actions are beginning to set up […]<\/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-171588","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/171588","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=171588"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/171588\/revisions"}],"predecessor-version":[{"id":171593,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/171588\/revisions\/171593"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=171588"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=171588"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=171588"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}