Trading position (short-term; our opinion): short positions (100% position size) with stop-loss level at 3100 and the initial downside target at 2400 (December 2018 lows).
If you think that yesterday's session in stocks was a bloodbath, don't look at today's overnight trading. It would be an understatement to say that the markets didn't buy into stimulus package contours or the 30-day Europe flights ban. What about today's ECB monetary policy statement, can that really lift the bulls? Enjoy the wild ride and despair not, as we're profiting on it.
Let's jump right into the weekly chart to see the shape of the week-in-progress (charts courtesy of http://stockcharts.com).
The sizable bearish gap remains unchallenged, and the bears keep the reins. More details about the stimulus package or any other measure (the Europe flight ban or Fed repo operations) didn't exactly instill confidence, and stocks keep reacting to the bad incoming coronavirus-related news.
This week's volume is on track to beat that of the either two preceding weeks, lending more support to the bears. And so do the weekly indicators. The bottom clearly appears not to be in yet.
While a strongly bearish reversal in itself, yesterday's closing price doesn't paint the full picture. The plunge continued overnight unabated, and the current fix at below 2535 means that our open short position is already over 300 points in the black! New 2020 lows are very likely ahead of us - that's a pretty safe bet to make as the nearest strong S&P 500 support is at the December 2018 lows at around 2400.
Summing up, the bears are firmly in control, and the current policy response hasn't been a game changer. Both the weekly and daily charts keep sending bearish messages. The downswing appears likely to have further to go on the downside before the market regains some confidence - especially with stocks in a bear market already as they gave up more than 20% from their February highs. Therefore, keeping open the profitable short positions is justified.
Trading position (short-term; our opinion): short positions (100% position size) with stop-loss level at 3100 and the initial downside target at 2400 (December 2018 lows).
Thank you.
Monica Kingsley
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care
