Risk-off or uptrend continuation?
In the previous Q2 of 2020 which is ending next week, we had a COVID-19 panic attack, countries, economies restrictions, and a recession beginning All of that led to economies around the world facing downside in GDP, production, transportation, tourism, and many other industries. Unemployment rates started to go higher in the US, Europe, UK…
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But wait what happened with the stock market? As we had a panic selling in February and March, you can imagine Central Banks all over the world jumped in with unlimited monetary easing and asset-buying which led to S&P500 only (the same is with other Indices) to almost 90% retrace of the swing down to 2250. And many of the traders are asking themselves what now?.
For that, we will take a look at the DJIA present moment. DJIA also had its fair share of the CB pump up retracement, which, technically, by the way, is not at all unusual after such a huge swing down. But DJIA is the first of all the other Indices touching and testing a huge downside reversal key 25000 level of the rising wedge (usually bearish) and just a daily close will lead to a push down to 23000 again and beyond. So pay attention to this price action closely as it will indicate risk-off. A bounce and a daily close above 26250 would lead to an upside extension and a 30000 retest probably. P.S. Detrended Price Oscillator is already calling the reversal.
One more important instrument to watch as the risk-off proxy and recession indicator is WTI Oil. It is also testing the rising wedge reversal 38 level and a daily close here with the confirmed dive below 36.30 will give us a huge, huge short trade opportunity with the high probability outcome. Bounce here will give us a long-trade opportunity. Also, the chart below Oil, the 10-Year US Notes Index TNX is at its lowest in almost 20 years! It has found good support at 5.50 and we could see a rise to 13.95 upside reversal key point, so the Yields could explode higher on a risk-off, which will drive DXY higher as well. Will it happen now where Gold, Indices, Bonds are all up? Will we have a blow-off with a huge trading opportunity? We will soon find out.
