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The S&P 500 sank to new 2020 intraday lows yesterday, but staged a recovery in the closing hours. That's what has happened in both preceding sessions. Will the gains finally stick one of these days?

Let's dive into the daily chart (chart courtesy of http://stockcharts.com).

One day up, the other day down. Wash, rinse, repeat. But the pattern of three consecutive rallies into the session close looks encouraging. While the pace of declines has moderated, the sizable intraday volatility remains.

These were our yesterday's notes about the daily indicators:

(...) they're refusing to budge much lower with each daily slide (that speaks to prices being overextended to the downside), and Stochastics has even flashed its buy signal. While the signal came in its oversold area and thus is not as reliable as the one generated outside this range, it's still notable.

It's true that Stochastics' buy signal has been invalidated yesterday as prices slid below 2280. But we've seen another overnight rally above 2400. And at the moment of writing these words, stock futures are trading at around 2350. We also also count on intraday volatility approximately in line with yesterday's figures. One more thing though before summarizing.

Let's recall our points regarding the medium-term picture, as our yesterday's observations are still valid today:

(...) While the week is far from over, the price action smacks of a reversal in the making. Accounting for yesterday's session , the volume appears on track to beat last week's one. Should weekly closing prices stick around this level, that would support the likelihood of a turnaround. But what kind of a turnaround? It's our opinion that this would most likely mark a temporary respite only.

Summing up, whilethe bears have the upper hand, the potential for an upswing hasn't decreased since yesterday. And we plan to take advantage of it. This is primarily supported by the daily indicators' posture. Covering our short-term game plan, the trading position details are reserved for our subscribers.

If you enjoyed the above analysis and would like to receive daily premium follow-ups, we encourage you to sign up for our Stock Trading Alerts to also benefit from the trading action we describe - the moment it happens. The full analysis includes more details about our current positions and levels to watch before deciding to open any new ones or where to close existing ones.

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care

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Bouncing off yesterday's new 2020 intraday lows, the S&P 500 closed higher on the day. But what about today's premarket action? The bulls didn't add to their gains in the overnight trading. With the futures back below 2400, where next for the stock market?

Let's start with the weekly chart to see the shape of things this very moment (charts courtesy of http://stockcharts.com).

While the week is far from over, the price action smacks of a reversal in the making. Accounting for yesterday's session , the volume appears on track to beat last week's one. Should weekly closing prices stick around this level, that would support the likelihood of a turnaround. But what kind of a turnaround? It's our opinion that this would most likely mark a temporary respite only.

Let's move on to the daily chart.

Similarly to Friday, stocks rebounded yesterday. While that appears encouraging, let's examine whether our yesterday's notes remain up-to-date also today:

(...) The daily indicators maintain their very extended posture. While that's no guarantee of a stock rebound, another relief rally might be due in short order.

The potential for a rebound is stronger today than has been yesterday, and it's not just because of the potential next Fed move later today that might spur buying. It's the daily indicators - they're refusing to budge much lower with each daily slide (that speaks to prices being overextended to the downside), and Stochastics has even flashed its buy signal. While the signal came in its oversold area and thus is not as reliable as the one generated outside this range, it's still notable.

That's because should prices remain roughly unchanged today, or even move higher, Stochastics is likely to wave goodbye to its oversold area, lending more credibility to its buy signal. And that would increase the likelihood of more traders jumping in on the unfolding upswing.

Therefore, the current price point offers an opportune entry point from the risk reward perspective - just like our yesterday's profitable long trade did. Time for some more profits! The full details are reserved for our subscribers.

Summing up, whilethe bears have the upper hand, the potential for an upswing is growing day by day. And we plan to cash in on that just like we did yesterday. This is primarily supported by the daily indicators' posture. Our subscribers have the trading position details.

If you enjoyed the above analysis and would like to receive daily premium follow-ups, we encourage you to sign up for our Stock Trading Alerts to also benefit from the trading action we describe - the moment it happens. The full analysis includes more details about our current positions and levels to watch before deciding to open any new ones or where to close existing ones.

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care

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Going into yesterday's trading, the S&P 500 could have shown some signs of life. After all, the pace of selling pressure looked to have abated with Friday's encouraging reversal into the closing bell. But after a meek attempt to narrow the sizable gap at yesterday's open, the bulls threw in the towel, and stocks endured another bloodbath. The overnight 100 point rally also fizzled out. Is all hope lost now?

Let's start with the weekly chart to see the shape of things this very moment (charts courtesy of http://stockcharts.com).

The bears clearly continue holding the reins, and the volume so far appears roughly in line with preceding week's one. This means that the move lower has legs. But does it mean that stocks will move in a straight line down?

Not at all. Please note that they're trading at the December 2018 support right now, bouncing back and forth. Earlier today, they have broken below yesterday's lows only to trade at around 2460 as we speak.

Let's examine the daily chart next.

Yesterday's plunge took stocks well below their Thursday and Friday lows, be they closing or intraday. The daily indicators maintain their very extended posture. While that's no guarantee of a stock rebound, another relief rally might be due in short order.

Let's quote from our today's Gold & Silver Trading Alert:

(...) we would like to draw your attention to the specific pattern in the daily candlesticks.

The S&P 500 futures are posting lower intraday lows, but the pace at which it declines overall, has slowed down compared to previous days.

Given all the similarities (as discussed yesterday) to 2008, did we see something similar back then, and if so, what happened next?

We did. Just before the sizable corrective upswing. This indicates that the stock market is likely to correct upwards anytime soon.

There are also three big non-market factors that make it even more likely.

First, the Fed's interest rate decision is tomorrow, and it could be the case that the Fed pumps even more liquidity into the system.

Second, which is related to the first point, is that just after the Fed's major surprising move, the market declined anyway... Which makes the Fed look... Well, stupid. The officials don't like to look stupid, and Fed's credibility is of utmost importance, especially now when they have used most of their bullets. This means that the Powers That Be will likely use whatever trick they could to make the stock market rally. Perhaps by asking their investment banker friends to start buying stocks (or maybe they will be rather "persuading" them than "asking"). Or perhaps short-selling will be banned... Which brings us to the third point.

Third, the short-selling is already being banned in Europe. Quoting from Reuters:

France, Italy and Spain are introducing curbs on stock market trading on Tuesday, banning short-selling to shield some of Europe's biggest companies from a sell-off triggered by the coronavirus.

France is banning short-selling on 92 stocks, the financial markets authority said as it tries to calm market turmoil. Belgium also took a similar step.

The Powers That Be desperately want to stop the declines and... We think they will succeed. But only for a while.

That's certainly food for thought.

But how to play the current setup? The answer is reserved for our subscribers. And it's not a yes-or-no one at that.

Summing up, the bears remain firmly in control, and they have confirmed it with yesterday's powerful downswing. The potential for a (temporary) reversal looms large though, and in the trading position details, you'll find our game plan for the hours ahead of yesterday's Fed meeting.

If you enjoyed the above analysis and would like to receive daily premium follow-ups, we encourage you to sign up for our Stock Trading Alerts to also benefit from the trading action we describe - the moment it happens. The full analysis includes more details about our current positions and levels to watch before deciding to open any new ones or where to close existing ones.

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care

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