Investing Recession Talk

A Coronavirus Market, Part 2

As I am trying to stick to a relatively frequent schedule of blogging while navigating what could otherwise be known as “Apocalypse Lite”, I find myself frequently checking some indicators as to where this whole coronavirus market is heading.

As an aside, forgive me if I am not able to make as frequent updates. I work for a major regional bank. And as they say, the times, they are a changin’.

So, looking closer, here is what the market is looking like as of the bell today:

This is the daily chart of the Nasdaq. I use the Nasdaq for a reason. The reason is that I believe this is where the healthiest investments are. The Nasdaq 100 has been very resistant to the recent declines. Compared to the S&P, and the sickly Dow, the Nasdaq 100 has been the knight in shining armor for the indices of the world.

Looking at the daily chart, the bullish MACD cross which happened late last week is continuing. Right now it is in somewhat of a no man’s land. We could continue to rally from this spot forward, or we could be turning back down to retest the lows. I think it is around a 50-50 chance here, depending on what happens over the weekend.

If we take a step back and look at this chart from a weekly view, we can make a better prediction to where we might be headed:

From the weekly, the current MACD is indicating that we are going to continue to the downside, and that this was merely a dead cat bounce- your best bet is to prepare for additional downside in the coming weeks.

I would say, based on the chart analysis that we may be looking to retest the lows in the coming weeks, and to get yourself some hedges for the chance we do. The weekly trend is to push lower. I would say the odds of higher: lower are 1:2.

We have to remember to turn to the data in order to make our moves when things get wacky like they are now. The VIX hasn’t been higher in more than a decade, including the great recession. Don’t get caught going all in before all of the indicators are looking up.

I personally am still long, hoping for that rebound, even though it is looking bleak. I am keeping an eye on the data, and watching the news for any slowdown of this scourge.

Stay safe this weekend and don’t drive yourself crazy. Remember that this is coronavirus market is only temporary, and we will recover.

Leave a Reply