First COVID-19 Bottom?
Tomasz Wisniewski | Feb 26, 2020 08:47AM ET
World indexes are facing a dynamic situation. We wrote a piece about DAX and S&P 500 on Monday, when the sell-off was just after the take-off. Bears did not lose the momentum on Tuesday and entered Wednesday with a very convincing slide (during the early hours of the European session). Stock Markets are not the bottomless wells though. Here, many traders love to catch falling knives, cats (like in a dead cat bounce) etc. This is what we can witness today, in the middle of the European session.
As for now, DAX and S&P 500 are trying to establish first, COVID-19 fear-induced bottom. I have to admit that it is going pretty well and on a daily chart, in both cases, we have beautiful pin bars. Hammers to be accurate. Should we be surprised? Yes and No. Yes, as S&P 500 broke already two major supports mentioned here on Monday (3210 points and major up trendline). Also, DAX managed to break the crucial 12900 support. No, as DAX is bouncing from a major up trendline and not because V-shape reversals are what stock traders do. We can say, that in the past 10 years it became their favorite movement. Crème de la crème of the stock trading. We have already witnessed several sharp selloffs and after that, even more aggressive buying. If from those lows, we would make new all-time highs in a week, probably nobody would be surprised. Well, at least those who are on the market longer than a year.
We should not get too optimistic though. The daily candle is not finished yet. Its good for a start but to establish a bottom, we need to keep the price around the current levels or higher. I think that in the current situation, only proper hammer can stop the panic. Daily hammer candle on the SP500 and DAX should definitely attract many investors spooked in the past few days. Some prices started to look pretty attractive, right?
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