Saturday, March 7, 2020

The Addict Wants His Fix Or Else

SGS  Market Timer Status:  SHORT 
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

sgs-st Market Timer Status: 

sgs-st is a Short-Term (hours to days) Timer

As shown on the above busy chart, SPX is now trading below its M-DTL (Monthly Dynamic Trend Line, aka Monthly 13 EMA).

Since 1990, there have been eight instances, including the current one, that SPX has broken through its M-DTL and started to trade below it (shown by blue arrows on the chart above). In six out of those eight, the Fed intervened with a massive monetary stimulus package, stopped the decline, and shored up indices. In the remaining two instances (Oct 2000 and Jan 2008), however, there was no fiscal or monetary intervention. In 2000, SPX continued its decline for another 42% and bottomed in October 2002 when Iraq War fiscal spending started. In 2008, SPX continued its decline for another 52% and bottomed in March 2009 when the Fed started to massively buy mortgage backed securities via QE in order to stimulate the housing market.

Once again, SPX is trading below its M-DTL and the addict is demanding his fix or he would burn the house down as he did in 2000 and 2008. What is needed now is a fiscal stimulus package but in the current political environment it would not pass in the Senate. So the Fed has to step in and do something to pump more money into the market. I'm watching the 20% marker on the sell-off scale. Once SPX correction gets close to 20% (around 2750, 19% drop for the all-time high), the Fed very likely would rush in.

If the Fed does not act or whatever they do is not what the market is demanding, selling would continue until the Congress passes a massive fiscal spending sometime in 2021.
SGS declined more last week and confirmed major indices selling off.

Support and resistance levels for SPX for this week are shown above.

My Plan

sgs-st is stilll neutral and 
I'm in cash and waiting for the next sgs-st signal.


SPX: S&P 500 Index    SMA: Simple Moving Average
DJI: Dow Jones Industrial Index    EMA: Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ASL: Active Support Line
OEX: S&P 100 Index    ARL: Active Resistance Line
NDX: NASDAQ 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line
TLR: Trend Line Resistance   TLS: Trend Line Support

Disclaimer: The views expressed are provided for informational purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.