by Chris Vermeulen of The Technical Traders
We’ve continued to attempt to warn investors of the risks ahead for the US and global markets by generating these research posts and by providing very clear data supporting our conclusions. Throughout the entire months of May and June, we’ve seen various economic data points report very mixed results – and in some cases, surprise numbers as a result of the deep economic collapse related to the COVID-19 virus event. This research post should help to clear things up going forward for most traders/investors.
As technical traders, we attempt to digest these economic data factors into technical and price analysis while determining where and what to trade. We attempt to identify the “Best Asset Now” (BAN) for trading based on our proprietary technical analysis and predictive modeling tools. We also attempt to stay away from excessive risks in the markets. The reason we adopt this strategy is to help protect assets and to attempt to assist our clients and followers in avoiding sometimes foolish trading decisions that can destroy your account and future.
S&P 400 MIDCAP E-MINI FUTURES – WEEKLY
We are focusing on the MC, S&P 400 MIDCAP E-Mini Futures, charts today while attempting to illustrate the technical factors that are currently present in the longer-term Weekly and Monthly charts. Our researchers believe the month of June presented a very clear “high price peak” that suggests the US stock markets may have established a “recovery price high” in June 2020. This high price level reached just above the midpoint of the YELLOW price channel level that originated from the market bottom in 2009. This price channel is very important for technical traders because it relates the high-low price range that was established over the past 8+ years as a “trend barrier” for price.
When that channel was broken in March 2020, this became the first time since the low (bottom) was established in 2009 that we witnessed any significant breach of the lower YELLOW price channel. It also indicated a substantial disruption in the markets was taking place – the COVID-19 virus event that disrupted the entire globe. Currently, the price has rallied back into this YELLOW price channel and stalled near the midpoint of the YELLOW price channel.
There is very strong support between 1775~1815 on the MC chart originating from the 2018 and 2019 low price levels (see the LIGHT BLUE Rectangle on this chart). Additionally, our Adaptive Fibonacci price modeling system is suggesting a “Price Trend Void” exists between 1525 and 1780 (between the two Fibonacci “Trigger Levels” – highlighted by the LIGHT YELLOW Rectangle on this chart. This price void represents a wide range between the Bullish and Bearish trigger levels on this weekly chart. Currently, the price is very near the Bearish Fibonacci Trigger level @ $1780 (the RED line on this chart near the right edge). Once price falls below this level (again), it will confirm a potential Bearish price trend is likely.
The lower Bullish Fibonacci price trigger level, near $1524, was confirmed in late April by price. Technically, this level now becomes “support” for the market as we wait for the price to confirm or deny the new Bearish Trigger level. If the price fails to confirm the new Bearish Trigger level (close below that level), then the previous Bullish trend is intact.
Our researchers believe the wild rotation in price near the middle/end of June, where the markets reached a peak level, then experienced a deeper downside price correction, suggests the markets have reached a strong resistance point near the middle of the YELLOW trend channel – and rebounded lower. If our research is correct, this suggests price has already reached an upper resistance level and rotated into a new Bearish trend. We would now want to see how price reacts to the lower YELLOW channel and the new Bearish Fibonacci Trigger Level – these act as an intermediate support. The price must fall below these levels to confirm the Bearish price trend – where the price will enter the “void” between the Fibonacci trigger levels.
S&P 400 MIDCAP E-MINI FUTURES – MONTHLY
This Monthly MC chart highlights the broader market technical research supporting our analysis (below). The same type of Fibonacci Trigger levels exists on this Monthly chart as we see on the Weekly chart. In fact, they are almost exactly the same levels (1545 and 1780). The alignment of these levels on both the Weekly and Monthly charts suggest these trigger levels are critical for future price activity/trends.
If the MC price level fails to establish a new upward price trend and close above $1780, then the Bearish Fibonacci trigger level has been “confirmed” and we can determine that the current price trend is Bearish. This would likely lead to a breakdown in price levels targeting the midpoint of the LIGHT BLUE price channel midpoint level, near $1525 – possibly much lower.
Recently, we posted a number of research posts suggesting this market setup is somewhat similar to previous market peaks throughout history.
- June 25, 2020: US Stock Market Enters Parabolic Price Move – Be Prepared, Part II
- June 21, 2020: A Stealth Double Dip or Bear Market Has Started
- June 14, 2020: Revisiting Our ADL Predictions For S&P 500
CONCLUDING THOUGHTS:
Remember, developing a winning strategy is not about trading every trend and day-trading every move, it is about timing your trades and strategically positioning your portfolio to take advantage of the “best asset now”. We’ve developed proprietary technology that assists us in determining the best assets to be invested in and our predictive modeling and other proprietary tools assist us in identifying confirmed trade triggers. Our objective is to assist our clients in generating consistent profits – not hundreds of trades.
If you were caught on the wrong side of this move recently, please remember that we tried to warn you of our multiple research articles and clear content. We’ve been warning that this upside rally was a speculative price move driven by foreign and US investors believing the V-shaped recovery was real. The reality of the situation is that this recovery is going to be much more volatile than many people believe. This is a global economic event – not just a Fed Blip or some other isolated panic volatility.
You better stay on top of these trends and risks in the markets to stay ahead of these bigger moves.
As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders. 2020 is an incredible year for traders and investors. Don’t miss all the incredible trends and trade setups.
Subscribers of my Active ETF Swing Trading Newsletter had our trading accounts close at a new high watermark. We not only exited the equities market as it started to roll over in February, but we profited from the sell-off in a very controlled way with TLT bonds for a 20% gain. This week we closed out SPY ETF trade taking advantage of this bounce and entered a new trade with our account is at another all-time high value.
Ride my coattails as I navigate these financial markets and build wealth while others watch most of their retirement funds drop another 35-65% during the rest of this financial crisis going into late 2020 and early 2021.
Just think of this for a minute. While most of us have active trading accounts, what is even more important are our long-term investment and retirement accounts. Why? Because they are, in most cases, our largest store of wealth other than our homes, and if they are not protected during the next bear market, you could lose 25-50% or more of your net worth. The good news is we can preserve and even grow our long term capital when things get ugly like they are now and ill show you how. One of the best trades is one your financial advisor will never let you do because they do not make money from the trade/position but we do have a way for you or your advisor can take advantage of the market gyrations with our Technical Wealth Advisor investing signals.
If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we issued a new signal for subscribers.
Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.