Chart Of The Day: Yes, We’re Still Bearish On The S&P 500
Investing.com | Mar 31, 2020 13:09
Today, the contract on the S&P 500 Index is up, along with most global stocks, after China surprised to the upside with its factory data. However, economists still forecast a terrible first quarter GDP for the second largest economy in the world – the worst in three decades.
In the U.S., New York City, home to Wall Street, has become the world’s coronavirus pandemic epicenter . The world's largest economy has already seen more than 164,000 people infected across the country, with over 3,000 deaths.
There's no sign that we're any closer to finding a COVID-19 vaccine, despite the ubiquitous news hype about numerous scientists being on the verge of a breakthrough. The world’s foremost experts have been working on an HIV vaccine for over 30 years, yet there's still nothing to show for it.
The outlook continues to look grim. Analysis of the charts sharply illustrates the way fundamental issues are reflected in the technicals: despite short-term rallies, the downtrend remains firmly in place.
Yesterday, the S&P 500 failed to post higher than Thursday's highs, which kept the gauge trapped within its falling channel, forming the descending peaks and troughs that confirm a downtrend.
On the other hand, both the MACD and the RSI might be gearing up for a rally. These conflicting signals could generate considerable volatility, before a direction is determined. We bet on price, siding with the descending peaks and troughs within the falling channel.
That means that we trust selloffs, not rallies, to determine where stocks are expected to keep heading.
h2 Trading Strategies/h2Conservative traders will probably wait for the MACD and RSI to catch up with the bearish path for the price, before risking a short position.
Moderate traders need confirmation that the rally from March 23 is topping out, such as with a long red candle, below the channel top.
Aggressive traders may short at will, according to risk aversion and trade plans.
Trade Sample - Short Position
- Entry: 2,625
- Stop-Loss: 2,650
- Risk: 25 points
- Target: 2,500
- Reward: 125 points
- Risk-Reward Ratio: 1:5
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