Technical Analysis Points To Key Reversal Of Global Markets
Chris Vermeulen | May 06, 2020 12:09PM ET
Recently, we received a number of email messages and comments regarding our recent Bitcoin article, and how we attempted to explain the market trend/technical analysis. It appears we were not making our interpretation very clear for our friends and followers. This article should help to clear up our interpretation of the major market trends and our advanced technical analysis tools and utilities.
As purely technical traders, there are certain things we want to make clear. First, we do pay attention to what is happening to the fundamentals and global economic data when it posts. We've authored many previous articles stating our belief that “capital is like a living, breathing entity that attempts to survive (generate ROI with little risk) in various global market environments.” In order for us, as technical traders, to identify real opportunities for superior trades, we must be aware of what is happening in the “environment” that surrounds us.
A perfect example is a recent collapse in oil. We continue to read articles of how thousands of traders believed super-low oil prices were a gift, and these traders piled into long trades expecting oil to rebound higher. This happens when technical traders fail to understand the environment in which the instrument is trading within. At this time, the supply side for oil vastly outweighs the demand-side – so the environment is skewed towards much weaker price activity. The chance that any moderate price recovery would take place is minimal until the supply glut is diminished.
One of the easiest ways to think of a truly technical trader is that we don't care if the price goes up or down, we just care that our technical triggers and indicators present clear opportunities that are superior to more traditional methods of trading.
To accomplish this, we believe we must understand the environment in which we are trading and the technical conditions that are present within the charts. Technically, the price may be going up within a defined bearish/downtrend. This does not mean the upside price move is a technically valid “trade trigger.” The opposite may be true for a move down in a bullish trending market. Without proper confirmation of the overall technical bias, environment and shorter-term technical triggers – one might as well throw a dart at a wall and hope for the best.
In our view, we issue many published research reports for our friends and followers to read and review every week. We show both bullish and bearish potential outcomes and depending on which way the market breaks, we will execute trades in that direction. What we do not do, is trade based on forecasts and predictions. Instead, we follow the price. Our interpretation of the technical triggers, economic data, forward expectations, and other setups are designed to help you learn how we conduct our research and to help you find opportunities in the
markets. Our members receive this same research and more – they receive our hand-selected trade triggers. These are the best technical setups/trade triggers known as BAN Trades (Best Asset Now) so we can find that provide superior opportunities for skilled traders.
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This chart, below, shows our historical results for the past 2.5 years. You'll notice that we do sometimes take losses – yes. You'll also notice the consistency of the profits – yes. We hope you'll also notice that we work very hard to make sure our members' success is the first priority in everything we do. 2020 has been a slow year for overall portfolio gains simply because of the market crash and extreme volatility.
My No. 1 goal is to trade when risk is manageable, and the market is predictable. Don't get me wrong, we have made money on the SPY, over 20% in TLT, 9.5% in GDXJ, and yesterday we locked in 11% on natural gas, so we are trading. But position sizes are small in comparison to our overall portfolio value, so we don't get oversized portfolio growth. When indexes, sectors and commodities are moving 10-90% a day, it's a time when position sizing becomes curial for survival.
You will not notice the market crash this year had no impact on our account because we did one of the best trades during the unexpected and unpredictable crash, we moved to 100% cash. Our results are based on a $20,000 account and over the past 2.5 years we are averaging 33% ROI with very little drawdowns.
Now, back to technical analysis.
Our research team believes the markets have set up a massive downside price advance (creating a much deeper low that confirms Fibonacci price theory and aligns with our Fibonacci Price Amplitude Arcs), which sets up a very unique technical pattern. Until the price is capable of establishing a series of new higher-high points through consecutive upside price advances and until the weekly and monthly charts confirm a new high price breakout – technically speaking, we're still in a bearish price trend.
Weekly S&P 500 (SPY) Chart
This weekly (NYSE:SPY) chart, below, shows you three key technical factors that tell us there is a greater risk of a breakdown in price than any upside price trend continuation:
A. The recent low/bottom price level broke below the December 2018 low price level (new lower low).
B. The GREEN ARC price level is a massive 1.618 Fibonacci Price Amplitude Arc that suggests massive resistance exists at this level. Price moving above this level then falling back below it suggests a “scouting pattern” type of event took place and failed.
C. Recent price activity has rallied from recent lows too, again, reconfirm the GREEN ARC resistance level. We believe this Fibonacci Price Amplitude Arc will present a major price ceiling as Q2 and Q3 economic data pushes forward – driving the price lower over time and eventually targeting the RED support level near $208 in July or August.
You may remember that we've been suggesting a bottom will not complete until sometime after July or August 2020 in previous research posts. Now you know where we derive these projections and expectations, we use technical analysis and our advanced predictive modelling tools to “see into the future.” Believe it or not, we've already mapped out SPY price activity 10+ years into the future.
Weekly Transportation Index (TRAN) Chart
This TRAN Weekly chart also helps to confirm our technical analysis research. We are deploying the same types of technical analysis tools on all of these charts to show you how our research team attempts to identify trends and opportunities. You can see the heavy LIGHT RED Fibonacci Price Amplitude Arc near the peak in February 2020. This arc represents a massive price resistance channel. You may also notice the thinner ORANGE Fibonacci Price Amplitude Arc that touches recent lows? This arc acts as support in its current form.
Our proprietary Adaptive Fibonacci Price Modeling System is drawing a CYAN projected target level from recent lows where the heavy CYAN line is displayed on this chart. Additionally, a previous
BLUE target level is also displayed on this chart, which originated from the recent PEAK in February 2020. Now, pay attention to where the TRAN price has found recent resistance and stalled – right at those levels. We believe the failure of the SPY and TRAN to move above the ARCs and Fibonacci price targets suggests a critical upward price trend failure. A failure of this nature will prompt a new downside price move in the near future as price must always attempt to establish new price highs or new price lows based on the Fibonacci Price Theory (technical analysis).
Monthly Dow Jones Industrial
This last chart, the Monthly INDU, is probably the most impressive one so far. Clear Fibonacci Price Amplitude Arcs suggest massive resistance near the February 2020 peak levels. A very clear
downward price channel originating from the February 2018 lows and transitioning across the December 2018 lows and into current lows. An Adaptive Fibonacci Price Modeling System target
price (CYAN) near 8108 (very near current price levels) and a very clear technical price pattern (Dojis) suggesting a potential top or price reversal is setting up.
Lastly, the recent deep low price stalled very near to the historical YELLOW DASHED price channel that spans the 2000 and 2007 price peaks.
Pulling all of this technical analysis together with simple Fibonacci Price Theory suggests that until the markets can prove to us that price is capable of establishing we upside price structures, the recent deep new price low (near 18,265) suggests future price action may collapse even further and attempt to establish a new, deeper, “new price low” before the real bottoms set up in the markets. On this INDU chart, it suggests that a “deeper price low” may result in a move well below the YELLOW DASHED price channel from 2000/07 and attempt to move to the RED Fibonacci Price Target (NYSE:TGT) level near 14,000.
Concluding Thoughts
Obviously, we are still very bearish in terms of the current overall market trend. No technical analysis technique has shown us that the intermediate and longer-term trends have changed direction to bullish. Yes, our daily systems did identify a bullish trigger within this bearish trend on the SPY, which we executed successfully for our members. There is an opportunity to take a bullish trade within a bearish price trend when technical analysis confirms the trigger and it is executed properly.
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