Sunday, March 15, 2020

The Fed Will Come In Again & Again

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

The 2008 "Sub-Prime Crash" of equities is probably the closest parallel to what is happening now. Based on the level fear measured by SGS now and back in 2008, my guess is that March 2020 is October 2008. That means the sell-off likely continues for at least another 6 months. Last week, SPX tested its PUL-2 and then rallied on the back of the Fed $1.5 trillion intervention in the REPO and other treasury bonds related markets. The Fed will continue its intervention at an unprecedented level to shore up equities but monetary stimulus alone would not stop the decline. What's needed is a massive fiscal stimulus and that would not happen until sometime in 2021, very likely under a new administration and congress. At this point the likelihood of SPX testing its PUL-1 around 2500 is high. If PUL-1 is broken, then SPX would decline to find support around 2000 to 1800 by early 2021. Hopefully at that point, our equity markets start to recover on the back of "Infrastructure" spending.
SGS declined more last week and confirmed major indices selling off.  Last week on Thursday, SGS put in its 2nd lowest value since 1990.  That confirms that indices are at extreme over-sold levels and a sizable bounce in the next couple of days is very likely.

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

My Plan

sgs-st is stilll neutral (over-sold triggered) but indices are extremely over-sold and a sizable bounce on Monday and Tuesday is very likely.  I opened two SPY positions last Thursday and Friday.  My plan is to close those positions into the expected bounce.


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.