Stock, Shock And Two Smoking Barrels

Share On Facebook

Market turmoil from the US session turned into a global affair as Asian markets dropped and volatility spiked. And, for those who like such conditions, the ‘fun’ likely isn’t over yet.

Technically, we were out by a day, but we did note a pivotal day on the S&P500 earlier this week. By yesterday’s close the S&P500 has plunged -3.3% to clock up its second most bearish session this year. And, with the sea of red across Asia today its clearly not an isolated event. However, as it was ‘only’ its 251st most bearish session on record, we know things could have been worse too.

With a quick glance at the daily chart several things jump out which scream ‘bear’; the size of the candle, lack of wicks (upper/lower shadows), annihilation of key support levels and its gap lower. Moreover, the way it opened at the high and closed at the low following the gap is reminiscent of someone willingly jumping from a great height. And, with no evidence of a trough, we’d have to assume bearish momentum probably isn’t done just yet.

Having closed below 2796.34 and the April trendline, buy and hold investors are nervously eying the Feb 2016 trendline in hope of support. Bears meanwhile are likely licking their lips at its potential as their next target.

Still, it almost goes without saying the market could be overextended; RSI is its lowest in three years and yesterday’s extreme range expansion blew the bottom out of its lower Keltner band. Furthermore, after such a drastic change of sentiment we could find volatility outweighs direction, making the index very difficult to trade over the near-term.

So, if you’re late to the party it could be worth waiting for volatility to subside whilst keeping a close eye on related markets. If sentiment truly has turned we’d expect trends to develop on safe-haven markets such as CHF and JPY crosses, which could provide a better-timed entry around the ‘sell everything theme’.

 

Faraday Research offers real time FX and Equity trade signals from qualified analysts. Click here to try us free.

 

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Leave A Reply

 
Do you want to write for our Newspaper? Get in touch: newspaper@advfn.com

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P:32 V: D:20181020 03:27:02