Stock Market Analysis - 3/12/2020
Updated
The markets continue to accelerate to the downside as volatility continues to run higher. As a swing trader, there are three things I am doing in order to protect capital.
1. Lower risk - If you are putting on trade at this time, do so with reduced risk. Reduce your risk more than usual to protect yourself from the unusually large price swings that are common place in the current market.
2. Follow the 5DMA intermediate trend - Last week Friday and this past Tuesday, the markets closed bullish hinting to a possible reversal. Although a reversal was possible, the markets were still below a declining 5DMA, meaning it is not yet bullish. If you follow the 5DMA, you could have avoided these two bull traps. Here is an example by Brian Shannon: twitter.com/alphatrends/status/1086324636999012352
3. Staying on the sidelines - Aside from small bites here and there, I am typically staying on the sidelines. There is no reason to attempt to catch a falling knife; doing so in this current market conditions will simply leave you frustrated and emotional. It is much easier to just wait until the current market volatility subsides and a real bullish trend emerges.
The current market is for Day Traders. If you are day trading, you should be keeping risk small and avoiding overnight holds. If you do not have any day trading strategies or have not day traded before, you have no reason to do so now. Sleep in, wait on the side lines, and go have a beer.
SPY: Price action seems to be accelerating to the downside hinting at a possible exhaustion move in the near future. We are in a clear downtrend and SPY closed LOD meaning we are likely to see more selling tomorrow.
1. Lower risk - If you are putting on trade at this time, do so with reduced risk. Reduce your risk more than usual to protect yourself from the unusually large price swings that are common place in the current market.
2. Follow the 5DMA intermediate trend - Last week Friday and this past Tuesday, the markets closed bullish hinting to a possible reversal. Although a reversal was possible, the markets were still below a declining 5DMA, meaning it is not yet bullish. If you follow the 5DMA, you could have avoided these two bull traps. Here is an example by Brian Shannon: twitter.com/alphatrends/status/1086324636999012352
3. Staying on the sidelines - Aside from small bites here and there, I am typically staying on the sidelines. There is no reason to attempt to catch a falling knife; doing so in this current market conditions will simply leave you frustrated and emotional. It is much easier to just wait until the current market volatility subsides and a real bullish trend emerges.
The current market is for Day Traders. If you are day trading, you should be keeping risk small and avoiding overnight holds. If you do not have any day trading strategies or have not day traded before, you have no reason to do so now. Sleep in, wait on the side lines, and go have a beer.
SPY: Price action seems to be accelerating to the downside hinting at a possible exhaustion move in the near future. We are in a clear downtrend and SPY closed LOD meaning we are likely to see more selling tomorrow.
Note
The picture on QQQ is not looking good. Like SPY, the downtrend is accelerating. QQQ closed low of day (LOD) so expect more downside tomorrow. I am predicting an exhausion move to occur in the near future (Tomorrow or Monday). Note
IWM: Avoid avoid avoid. The daily chart on IWM is ugly as we broke through all possible support levels. IWM continues to lead the downside. 100 will be the next support level to watch. Expect more selling tomorrow as IWM closed LOD. Note
VIX is getting nuts. VIX is now at 75 and hasn't been this high since the financial crisis. We are seeing extreme volatility and is looks like it could get worst. The upside is accelerating and it is pointing to an exhaustion move in the near future. 
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.