Broad Market Sector Rotation Starts In 60+ Days – Part I

We have been writing about the strong potential for a deeper market rotation in the US and global markets for well over 60+ days.  In fact, our researchers predicted an August 2019 breakdown date based on Super-Cycle patterns that, eventually, pushed into 2020 as the US/China trade negotiations and other global news kept global markets in a low volatility bullish trend throughout the end of 2019.

We’ve highlighted some of our research posts over the past 30+ days to help illustrate the technical and price patterns that our research team has identified and shared.

December 20, 2019: WHO SAID TRADERS AND INVESTOR ARE EMOTIONAL RIGHT NOW?

December 16, 2019: CURRENT EQUITIES RALLY SIMILARITIES TO 1999

December 2, 2019: NEW PREDICTED TRENDS FOR SPX, GOLD, OIL NAT GAS

Technical Analysis is based on the premise that price reflects all news and expectations the instant that news or data is known.  A common term in Technical Analysis is “Bias”.  This is when the price trend is substantially more Bullish or Bearish by nature or expectation.  Bias occurs when investing conditions mostly eliminate risk (for the Bullish side) and opportunity (for the Bearish side).  When traders feel they can enter trades without any real risks (trading Long) or when they feel there is no opportunity for the markets to rally (trading Short), then a BIAS exists in the markets.

When the global markets rotate and volatility extends to much higher levels, the markets change from a “Biased Trend” to what Technical Analysts call “True Price Exploration”.  When this happens, price begins to operate under the price principles of Gann, Fibonacci and Elliot Wave theories where price attempts to rotate to new lows or highs in an attempt to “seek out” clear support and resistance levels before establishing a new longer-term “Biased trend”.

We believe the global markets are about to enter a very volatile period of sector rotation.  Certain sectors may see a much deeper price exploration than others.  For example, consumer product manufacturers focused on US and European markets may see very limited risks compared to the Industrial Supply sector where a global economic slowdown could really hurt their future expectations.

These two Market Sector Maps (source www.Finviz.com) highlight the change in the direction and scope of these changes over the past week and the past 30 days.

THIS FIRST SECTOR MAP IS A 1 WEEK SECTOR MAP

THIS SECOND SECTOR MAP IS A 1 MONTH SECTOR MAP

Pay very close attention to the sectors that were moderately or strongly weak in the 1-month chart and continue to weaken in the 1-week chart (Financial, Property, Telecommunications, Telecom Services, Healthcare, Biotech, Basic Materials, Industrial Goods, Lodging, Resorts, Travel, Hospitality, Food, Packaging, Textile.  The list is rather impressive and it suggests this Coronavirus has somewhat panicked the markets and consumers.  Yes, many of these consumers will continue to go out for food, entertainment, and other essentials – but what if 15% to 25% of them cut back on these activities and decide to stay home more often and watch movies or play games?

I remember in 1990 when Desert Storm started.  Just before this war started, the US economy was clicking right along.  I remember that within 10 days of the war starting, things started to change on the roadways and markets.  I also noticed a change in consumer spending with a friend’s computer gaming distribution company.  All of a sudden, consumers slowed their external purchasing activities and focused more on protectionist activities.  We believe this same type of event is going to quickly unfold within the US and other nations as this Corona Virus extends over the next 30+ days.

This is why I believe the volatility of price and market sector rotation will continue for at least 60+ days as the globe attempts to contain and eliminate the risks associated with this virus.  We understand the risks in the US and Canada are very small at the moment, but that has not stopped shoppers from emptying the shelves at the local hardware and pharmacy stores for “surgical masks” and supplies.  Trust us, people are already well into the protectionist-mode and are preparing for what may happen over the next 30+ days.

This creates an opportunity for technical investors and traders.  This potential for deeper price rotations and extended opportunities resulting from an end of bias volatile price exploration allows us to target very quick and exciting trades.

In part II of this research post, we’ll highlight three specific sectors we believe are poised for great trade setups as a result of the volatility and rotation in the global markets.  Join us in our quest to create incredible profits from these bigger trends – visit www.TheTechnicalTraders.com today.

Chris Vermeulen

Corona Virus and Manufacturing Shutdowns Will Affect Companies

A technical trader talks about this week’s large price swings, Coronavirus, and how to trade this volatility.


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Inverse Energy ETF Nearing Profit Taking – Could Rally Further

Following up on an exciting article we shared with friends and followers on January 17, 2020, it appears ERY has reached the first stage for profit taking with a fairly strong potential we may see this rally continue even higher.  Please review the following repost of our original research and analysis of ERY back in early January.

January 17, 2020: ENERGY CONTINUES BASING SETUP – BREAKOUT EXPECTED NEAR JANUARY 24TH

ERY BEAR ENERGY ETF – WEEKLY CHART

At the time we authored this ERY article, our team of dedicated researchers believed that Oil would retrace from recent highs near $65 and continue to move lower – targeting the low $50 to mid $40 price level.  Our expectations were that a move in ERY from near $39~$42 to an initial target level near $55~$57 would be an excellent opportunity if Oil broke lower.  You can see the CYAN Fibonacci projected target level that aligns with our original target price level on this chart below.

ERY BEAR ENERGY ETF – DAILY CHART

Currently, we believe this current target level has been successful and urge any friends and followers to pull at least 50% of your profits at this current level.  If you decide to allow the rest of your position to continue, stops should be moved to levels near or below $52.  We believe the continued upside potential for this trade is still valid with a secondary target above $67~$75.  Trail your stop with every new weekly high and look to start exiting this trade on any price tick above $67 or $72.

ERY BEAR ENERGY ETF – WEEKLY CHART

Some resistance may be seen between $56 and $61.  There are historical price peaks near these levels that may act as a price boundary throughout this rally.  Once the $64 to $65 level is breached, ERY should continue to rally higher is Oil and Natural Gas continue to weaken.  Remember, trail your protective stop higher with each new Weekly high.

We are pleased to deliver another incredible trade setup found by our team of dedicated researchers.  Nothing like finding a trade that rallied from $40.50 to 57.33 (+41%) and may continue much higher.

Please take a minute to visit www.TheTechnicalTraders.com to learn about our dedicated services for skilled traders and how we can help you find and execute better trades.  2020 is certain to be filled with extreme volatility and price rotation.  You might as well take advantage of our research and services to create greater opportunities for profits and trades.

Chris Vermeulen
Founder of Technical Traders Ltd.

A Combination Topping Pattern Is Setting Up

Our research team has highlighted a number of technical and other factors that point to a very real potential of a major market top setting up across the global markets.  We’ve highlighted a number of research articles over the past 30 to 45 days that clearly illustrate our interpretation of the US and global markets.

Our research team believes the Coronavirus outbreak in Wuhan china will cripple economic expansion and consumer economic activity in China and much of SE Asia over the next few weeks and months.  If the virus spreads into India, it could quickly target large portions of India’s economic capabilities.  We are very early into this potential pandemic event.  The growth rates reported by China suggest only a 2~3% death rate, yet an almost exponential growth rate for the number of invested.  It started off below 100 about 10+ days ago and is now almost ready to break 10k.

Skilled traders must understand that the world is far more inter-connected economically and via transportation than it was even 50 years ago.  More people travel to various parts of the world more often than ever before.  More goods and services travel back and forth across oceans and continents than ever before.  This inter-connected world is actually quite small when you consider a student or vacationer can travel more than halfway around the planet in less than 35 hours, access two or three major transportation hubs (airports) and have direct contact to dozens of people and indirect contract to thousands of people within that span of time.

January 23, 2020: JANUARY 2018 STOCK MARKET REPEAT – YIKES!

December 20, 2019: WHO SAID TRADERS AND INVESTOR ARE EMOTIONAL RIGHT NOW?

December 16, 2019: CURRENT EQUITIES RALLY SIMILARITIES TO 1999

Our concern is, quite literally, that the growth of the number of infected people related to this Coronavirus is only just starting to explode.

One analyst we were watching on TV suggested waiting for a -5% price correction in high-value US equities before attempting to buy back into this weakness.  Knowing that any type of global pandemic even could continue to expand for many months, years of decades, we believe a large number of these analysts are failing to understand the total scope of this potential event.

Our research team believes the next 6 to 12 months will become very telling regarding the real economic contraction resulting from the Coronavirus spread.  We believe the initial measures governments and world organizations are taking will shrink economic opportunity by at least 10 to 20% for certain nations.  If the virus explodes into Africa, or the Middle East, or North America, then we have another set of problems to deal with.  At that point, the economic ramifications could result in a 30 to 50% contraction in certain segments of the US and Global economy.

Let us try to explain our thinking…

No, people will not stop buying toilet paper, toothpaste, food, and other essential supplies, but they will likely slow their purchases at Starbucks, Movie Theaters, Social Events, Traveling to unknown areas and shopping in large exposed areas (big box stores).  Anything that is perceived as a risk will be viewed as potentially dangerous and unwanted.

Consumers and Businesses are like flocks of birds or schools of fish, they all seem to turn to follow the others and move as a single group or “beast”.  If consumers start to pull back as this issue extends, we expect the “beast” will follow this trend until the risk is minimized.

Even though the US economic numbers from Q4 are still landing with very strong numbers – remember this data does not include any real data from the current quarter.  Everything looks really good if you ignore the threat of the Coronavirus going forward (which is rather foolish).  Q1 and Q2 2020 could become a completely different set of numbers.

January 29, 2020: ARE WE SETTING UP FOR A WATERFALL SELLOFF?

We believe the waterfall even that we highlighted earlier this week is still a very valid interpretation of the global market future reaction throughout most of Q1 and Q2 of this year.  We don’t see any real alternative other than price contraction as long as the Coronavirus continues to wreak havoc across the planet.  If the virus is suddenly contained and diminishing, or cured, then we believe the global perception will change back to positive very quickly.

We believe the first waterfall event is already taking place.  We believe the second waterfall event will produce a downside price move targeting recent support near $307 on the SPY.  We believe any further breakdown of the price below this support level will prompt a downside price move targeting the $260 level.  These rotations will come in waves or waterfall events and could target various sectors of the US and global markets.

Pay attention to what the Transportation Index is doing as this outbreak continues.  Slowing consumer activity means essential items will still be in high demand, but big-ticket items, cars, luxury, and vacations may see a dramatic slowing in sales and activity.  Even homes and apartments may slow in sales.  People tend to become very protective and secure in these economic modes.

The Transportation Index may initially fall to levels near 10,200 before finding any real support.  Then a further downside move may target longer-term support near 8,500.  Below that level..  well, let’s just say that below that level and we could be well into a very serious Bearish contraction phase of the global markets.

Take this time to reposition your assets and protect your value.  You can always redeploy your capital when you feel the time is right to jump back into the markets.  We believe the next 60 to 90 days will become very informative relating to the spread and capabilities of this virus and our ability to fight it.  Don’t let this volatility be something like 2009 when you look back and say “I should have known better”.

Join my ETF Trade Alert Newsletter – Wealth Building Newsletter if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.

Chris Vermeulen
www.TheTechnicalTraders.com

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.  Visit our web site to learn how to take advantage of our members-only research and trading signals.

Silver Prepares For Next Leg Higher

Following up on some of our recent metals research, we wanted to alert our friends and followers to the incredible opportunity that still exists in Silver.  We’ve highlighted two of our more recent articles for reference and review, below.  Silver continues to be one of the most incredible opportunities for 2020 and Silver Miners (SIL) could explode to the upside as the price of Silver rallies to close the gap between the Gold to Silver ratio.

Our researchers believe Silver is currently undervalued, compared to Gold, by at least 240%.  Historically, the Gold to Silver ratio averages a 10+ year rotational range of between 63 to 67.  This means that through both peaks and troughs, ranging from the high 80s to mid-90s to the low 30s to mid-40s, on average the middle price range level for this ratio is near 65.  Currently, this Gold to Silver ratio is 88.4.

Gold is currently trading at $1590 – just below the recent peak near $1613.  We believe that Gold will continue to rally higher, breaking the $1613 level, and continue higher targeting the $1750 level over the next few months.  Eventually, within 2020, we believe Gold will continue to rally higher breaking the $2100 price level.

This continued upside price action in Gold, while Silver has really yet to see any massive upside price movement, continues to create a massive price disparity between Gold and Silver – which is highlighted in the Gold to Silver ratio.  As Gold rallies, Silver must begin to move dramatically higher in order to close this price disparity between the value of Gold to Silver.  Historically, we believe the rally in Silver will force the Gold to Silver Ratio to fall to near the 65 level.  This would represent a massive 70% to 120%+ rally in the price of silver – targeting $24.50 to 32.50.

GOLD AND SILVER RATIO WEEKLY CHART

If the Gold to Silver Ratio falls below the 65 level and targets lower ratios, as has happened in the past, then Silver may rally as high as $45 to $55 per ounce while Gold stays below $1800.  If Gold does rally above $2000, as we expect, the true potential for Silver experiencing a major price reversion event could be as high as $60+ per ounce.

Please take a minute to read some of our previous research posts regarding the metals markets here:

January 14, 2020: SILVER TRADERS BIG TREND ANALYSIS – PART II

December 30, 2019: METALS & MINERS PREPARE FOR AN EARLY 2020 LIFTOFF

DAILY PRICE OF SILVER CHART

This Daily Silver chart highlights what we believe will be the next move higher in Silver.  The next upside price advance should target the $21 to $23 level as Silver attempts to revalue compared to the price of Gold.  Near this $23 level, Silver should stall briefly before attempting to move much higher.  The reality is that once this revaluation event begins to take place in Silver, we believe it will prompt an extended price rally that could last well into 2023-2024.

PRICE OF SILVER WEEKLY CHART

This Weekly Silver chart highlights our research team’s expectations related to Silver over the next 6+ months.  At first, we believe the $21 to $23 level will become the target.  Then, a short period of price rotation will find support near $21 before another upside price leg pushes silver above $24.  Remember, if Gold continues to rally higher, these expectations could extend 5% to 10% in size and scale.

SILVER MINERS SECTOR ETF – WEEKLY CHART

Another key component of this move is the opportunity in Silver Miners.  This SIL Weekly chart highlights the real potential for a 20% to 30% upside price rally related to the expected price revaluation/reversion event we have been describing for Silver.  Miners are an excellent correlative component for skilled traders expecting a move like this in the metals market.

Learn how we can help you find and execute better trades and turn the extreme volatility into solid profits.  Read our research and see what our research team has been predicting over the past few months.  We dedicate our efforts to helping you find great trades and helping you protect your assets.

Join my ETF Trade Alert Newsletter – Wealth Building Newsletter if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.

Chris Vermeulen
www.TheTechnicalTraders.com

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.  Visit our web site to learn how to take advantage of our members-only research and trading signals.

Are We Setting Up For A Waterfall Selloff?

Most traders understand what a “Waterfall event” is if you’ve been trading for more than 3 years.  Nearly every downside price reversion event initiates in a breakdown event (the first tier of the waterfall event) which is followed by additional deeper waterfall price collapses.  Almost like price breaks lower, finds support, settles near support, then breaks lower targeting deeper price support levels.

SPY DAILY CHART

This example SPY chart from October 2018 through December 2018 highlights this type of event almost perfectly.  With each tier in the waterfall event, price searches for new support levels as price weakness drives price lower throughout each breakdown event.  We’ve highlighted these breakdown events with the MAGENTA lines drawn on this chart.

The recent downside price rotation after the world was alerted to the Wuhan virus presented a very clear “first-tier” waterfall event.  This first move lower is often rather condensed in size and scope – yet often within days of this first event, a bigger second downside waterfall event takes place confirming the bearish breakdown has momentum.  We believe this first move lower could be the first real tier in a broader global market waterfall event which may result in a much deeper price reversion event.

We believe the total scope of the Wuhan virus will not be known for at least another 20 to 30+ days.  After that span of time, we’ll know where and how aggressive this pandemic event has spread and what real capabilities we have for containment.  Therefore, we believe the downside price concern within the global markets is very real and just starting.

Very much like what happened in October 2018, the initial downside price move initiated on the US fed news and expectations.  When the Fed announced a rate cut, which shocked the markets, investors waited to see how the markets would react and within only 5+ days, the markets reacted violently to the downside.

Friday, January 24 was the “trigger date” for the breakdown in global markets from the news of the Wuhan virus.  We believe any further downside risk to the global markets will be known within another 5 to 10+ trading days – as more information related to the spread and containment capabilities of the virus are known.  Therefore, we are attempting to alert our followers and friend to the very real potential of a price breakdown event, a “Waterfall Event”, that may be set up in the global markets.

DAILY TRANSPORTATION INDEX CHART

This Daily TRAN chart highlights the recent breakdown in price that could be considered the first tier of the waterfall event.  The support level, highlighted in LIGHT BLUE, suggests price may attempt to stall near 10,800 before any further price breakdown happens.  A second waterfall tier could push the price well below the 10,000 level as the next real support exists near 9,9250.

DAILY 400 MIDCAP INDEX CHART

This Daily MC (S&P 400 MidCap) futures chart highlights a similar price pattern.  The initial breakdown tier is very clearly illustrated where the price fell to immediate support near 2050.  We believe any further waterfall tier even may push the price below the 2000 level and target real support near 1952.

DAILY FINANCIAL SECTOR INDEX CHART

This XLF (Financial Sector SPDR ETF) Daily chart, again, highlights the first tier breakdown in the price of the potential Waterfall event.  This is actually one of the clearest examples of how price operates within this type of rotation.  The initial downside tier broke through support near $30.00 and has begun to rally back above this level.  The LIGHT BLUE highlighted support range shows us where the first tier may stall.  Any further breakdown in price may push the price below the $28.50 level as price searches for new support.

We’ve referenced the 1855 “Third Plague Event” that hit in China and quickly spread to India, SE Asia, and other neighboring countries as an example of what may happen with the Wuhan virus.  The 1855 event killed over 15 million people (nearly 1.25% of the total global population at the time) and lasted until 1960 when the Plague cases dropped below 200.

We urge all traders and investors to prepare for a broader downside market event in the future – possibly a “waterfall event”. We’ll know more about the size and scope of this potential pandemic within 30+ days – but this may become a much bigger issue across the globe very quickly.  The volatility this event may create in the global markets is an ideal setup for skilled technical traders.  In the last week, we locked in profits on two trades SSO for 6.5% and TLT for 3%. Learn how we can help you find and execute great trades related to this wildly volatile event.

Join my ETF Trade Alert Newsletter – Wealth Building Newsletter if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.

Chris Vermeulen
www.TheTechnicalTraders.com

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.  Visit our web site to learn how to take advantage of our members-only research and trading signals.

The Platinum Breakout & Bull Market of 2020

Platinum has setup into a longer-term FLAG formation and has recently broken the APEX of this FLAG.  The long term potential for Platinum, in conjunction with the advance in Rhodium, Palladium, Gold, and Silver, is a new Bullish Price Trend.

Our researchers believe Platinum must move above $1200 for this new Bullish trend to anchor a “Breakout Base” formation.  The current investment environment suggests a new metals rally is setting up.  Fear is starting to take hold of the markets and industrial and manufacturing demands are still driving prices and supply demands higher and higher.  As investors pile into the metals as a form of safety, we expect Platinum to rally above $1200 within the next 4 to 6+ months and begin a much broader rally to levels above $1600 overtime.

Demand for Platinum has increased because of two main reasons:

1) Rapid increase in consumption in SE Asia
2) Increase in acceptance of fuel cells.

As we learn more about the industrial and manufacturing demands for Platinum. It becomes evident that a new upside bias in trend may just be getting started.

Traders need to understand and consider the opportunities presented by this incredible longer-term setup in Platinum.   Could platinum DOUBLE in price within 12 months?  Could it TRIPLE?

Follow our research to stay ahead of this incredible opportunity for skilled technical traders and learn how we can help you find great trades.

As a technical analysis and trader since 1997 I have been through a few bull/bear market cycles, I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

Join my Wealth Building Newsletter if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.

Chris Vermeulen
www.TheTechnicalTraders.com

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.  Visit our web site to learn how to take advantage of our members-only research and trading signals.

The Black Swan Event Begins

As the Asian markets opened on late Sunday, traders expected a reactionary price move related to the threat of the Wuhan virus and the continued news of its spread.  The US Dow Jones futures markets opened close to -225 points lower on Sunday afternoon and were nearly -300 points lower within the first 25 minutes of trading.  Gold opened $10 higher and continued to rally to a level above $15 higher.

If this is early price activity, or a reactionary price move, related to fear of what may come, then the warnings signs are very clear that global traders and investors believe this virus outbreak may very well turn into a major Black Swan event.

Our research team believes a 5% to 8% rotation should be considered a normal reversion range where price may find immediate support and attempt to rally from these support levels.  Anything beyond 10% may set up a much bigger price reversion event, something akin to a Black Swan event.  Therefore, we are advising our friends and followers to take the necessary steps to protect your wealth and assets as this move continued to extend.

30-MINUTE YM FUTURES CHART

This 30-minute YM futures chart highlights the reactionary downside price move (GAP) taking place on the open of the Asian markets.  This GAP lower may be just the beginning of a much broader downside price move.  We are going to have to wait and see what happens related to the Wuhan virus over the next 14+ days.

30-MINUTE GOLD FUTURES CHART

Gold shot up nearly 1% in early trading on Sunday.  Fear is driving investors to pile into the precious metals markets.  As news of this virus continues to hit the news cycle, we expect metals will continue to push higher and higher – likely targeting the $1750 level in Gold.

If you want to see what the big money players own check out these gold charts and a very different interpretation of the gold COT Data here.

If you have not been following our research and if you have not already positioned your portfolio for this potential reversion event, then now would be a good time to start taking action.  Do some research on the 1855 Third Plague Event in China where more than 15 million people died (nearly 1.25% of the total global population at the time).  If those levels hold for this event, then possibly 60 to 80 million people may die over related to this event.

Oil is collapsing again and just his out downside target of $53. Our energy sector trade idea is up over 15% already.

Remember, all of this is speculation at this point.  Yet we urge traders to act now to take action to prevent further erosion of their wealth and retirement accounts.  Visit Technical Traders Ltd. to learn how we can help you plan for these events, protect your wealth, and find great trades.

As a technical analysis and trader since 1997 I have been through a few bull/bear market cycles, I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

Join my Wealth Building Newsletter if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.

Chris Vermeulen
www.TheTechnicalTraders.com

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.  Visit our web site to learn how to take advantage of our members-only research and trading signals.

The Wuhan Wipeout – Could It Happen?

News is traveling fast about the Corona Virus that originated in Wuhan, China.  2744 cases and 80 deaths confirmed globally according to Bloomberg and the National Health Commission.

In most of Asia, the Chinese New Year is already in full swing.  Hong Kong, China, Singapore, Malaysia, India and a host of other countries are already starting to celebrate the 7 to 10 day long New Year.  Millions of people have already traveled hundreds of thousands of miles to visit family throughout this massive celebration.  We are certain that hundreds or thousands have traveled to all parts of the world by now.  The potential for exponential growth in the threat from this virus could be just days or weeks away.

Far too many people are too young to have any knowledge of the 1855 Third Plague Pandemic that originated in China.  This outbreak quickly spread to India and Hong Kong and claimed 15 million victims.  It lasted until the 1960s when active cases of the Plague dropped below a couple hundred.

If we consider the broader scope of this issue, we have to take into consideration the results it may have on the broader global economy, commodities and consumer activity as skilled traders.

The world is much bigger than it was in 1855.  We have more technology, more capability and faster response capabilities related to this potential pandemic.  Yet, we also have a much greater heightened inter-connected global economy, currency, and commodity markets.  What happened in China can, and may, result in some crisis events throughout the planet.  It is not the same world as it was in 1855. (Source: history.com)

It is far too early to speculate on any future economic outcomes related to this potential outbreak, but it is fairly certain that China, most of Asia, India and potentially Africa could see extensive economic damage related to a contraction in consumer and industrial economic demand as a consequence of this outbreak.  Once the Chinese New Year ends, in about 10 to 15+ days, people will return back to their home cities and we’ll begin to understand the total scope of this problem.  If the problem continues to be isolated in China, Asia and within that general region, then we may see economic consequences isolated to these regions.  If not, then we could see a much bigger and broader global economic consequence setting up.

The 1855 Plague Pandemic lasted for nearly 100 years and wiped out 1.25% of the total global population.  This was at a time when there was limited transportation options and global economics was a much smaller component of the total global economy.  Everything is somewhat isolated at that time. In today’s world, a similar type of event could wipe our 1% to 5% of the total global population before we have any means to attempt to control it.

Bill Gates believes this outbreak could kill more than 30 million people within 6 months (Source: businessinsider.com)

It is time to get real about this and prepare for how the global markets will interpret this potential outbreak.

We’ve been warning that the market was “Rallying To A Peak” recently and believe this outbreak has changed the minds of traders.  This could the catalyst that breaks the bullish trend for quite a while.  Skilled traders will be trying to get ahead of this rotation in the markets and attempt to deleverage risk.  As retail traders, we should be doing the same thing – deleveraging risk, buying metals, trimming open long positions and hedging into inverted ETFs.

DAILY ES CHART

This Daily ES chart highlights a very real support level near 3050 that also aligns with the longer-term Moving Average.  A downside move like this would represent a -10 to -11% downside price reversion and take us back to December 2019 price levels.  It could happen very quickly.

TRANSPORTATION INDEX CHART

This Transportation Index chart highlights a potential downside price reversion of -11% to -12% – targeting the 9,750 level.  We’ve recently authored an article about the weakness in the Transportation Index and how we believe it could be setting up for a downward price move.  If a breakdown move like this happens in TRAN, it would suggest a massive contraction in the global economy is taking place.

DOW JONES (YM) DAILY CHART

This last YM chart highlights support near 28,000 which would be an immediate downside target if the Dow Jones Industrials revert lower.  And, again, this would put us back to December 2019 price levels.  If this 28,000 level is broken, then we start looking at levels closer to 26,000 (roughly -20%).

CONCLUDING THOUGHTS:

Right now, consider this situation as you are a captain of a ship sailing into a storm.  You can either prepare for it and navigate through it to the best of your ability or ignore the warnings and hope for the best.  It is far too early to panic at this point, but a certain degree of “preparation” is certainly in order.

We’ll know more in about 7+ days as we learn how far and how wide this problem has actually extended.  In the meantime, watch your investments.  Protect your assets.  Prepare for the storm.  Best case, you can always reposition your capital for clearer skies in a few weeks.

As a technical analysis and trader since 1997 I have been through a few bull/bear market cycles, I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

Join my Wealth Building Newsletter if you want winning ETF swing trade alerts every month? Then ride my coattails as I make money while others will struggle and lose money as the markets correct and become more volatile.

Chris Vermeulen
www.TheTechnicalTraders.com

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.  Visit our web site (www.thetechnicaltraders.com) to learn how to take advantage of our members-only research and trading signals.

January 2018 Stock Market Repeat – Yikes!

Our research team caught a very interesting price pattern that correlates with the Put/Call ratio.  We are alerting our friends and followers with this research post of this exciting, yet unconfirmed, set up today.

In late 2017, the US stock market rallied from July through December with moderately low volatility throughout this span of time.  Near the end of 2017, the US stock market price activity stalled, then began a renewed price rally in early 2018 (see the first BLUE & YELLOW BOX on the chart below). Then, in January 2018, a very broad market reversion event took place which ultimately resulted in a very broad market correction in October through December 2018 of just over 20%.

The current price rally ending 2019 and starting 2020 is strangely similar to the price setup that occurred in 2017 and 2018.  We’ve seen a broad “melt-up” price pattern over the last 5+ months of 2019 with moderately low volatility.  We experienced a moderate price “stall” near the end of 2019 and experienced a broader renewed upside price rally in early 2020 (see the second BLUE and YELLOW BOX on the chart below).  We believe this could be a setup for a potential price reversion event in the near future – all we need is confirmation of the downside price rotation to take place.

A deeper price reversion event at this price level that equals the previous reversion event would push the SPY price towards the $265 price level – a 68 point price drop.  If such an event took place, we would be looking at a -15% to -25% potential price correction from current levels.

Let’s take a look at other charts and data that may confirm our research…

WEEKLY SPY (S&P 500) INDEX CHART – JAN 2018 AND JAN 2020

WEEKLY VIX CHART

This Weekly VIX chart highlights the consolidation of volatility that set up in late 2017 and late 2019.  Pay special attention to how broadly the VIX spiked in early 2018.  This spike happened because of the consolidation of volatility near lower extremes over the past 16+ months.  Given the recent volatility throughout 2018 and 2018, a downside price move of a similar range would likely propel the VIX to levels above 40~45.  Price would need to collapse below our expected range in order for VIX to spike above 50.  A move of this nature would suggest a downside price move beyond 25% to 30% – pushing the SPY below $240.

Again, our research team believes this is an unconfirmed price pattern setup.  We want you to be aware of what we are seeing in the chart and be prepared if it confirms in the future.

DAILY PUT/CALL RATIO CHART

Another interesting aspect of this setup is the correlation to the PUT/CALL ratio on the chart below. Every instance of the Put/Call ratio that fell below 0.80 for an extended period of time (2014, 2018 and now), prompted a downside price reversion of -10% to -15%.  Additionally, each instance of this setup (2014 and 2018) prompted an extended period of price volatility and rotation.

In 2014, the initial downside price reversion prompted a -13% to -15% price correction followed by nearly 8 to 10 months of extended price rotation before finally entering a new bullish price trend in late 2016.  Additionally, in 2018, the initial downside price reversion event wiped out nearly 12% of the value on the initial downside price move from this event.  Subsequently, over the next 12+ months, a second downside price move wiped out over 20% of the value from the SPY.

The current setup suggests any potential downside price reversion resulting from this setup we are alerting you to could easily target -12% to -15% on an initial reversion event.  Ultimately, the rest of 2020 could result in a very volatile year of price rotation if history teaches us anything.

Remember, this is not a confirmed trading trigger.   This is a warning that a price and technical setup is occurring in the markets that may become of real value to you in the immediate future.  The combination of these three charts, the SPY, the VIX and the PUT/CALL ratio, should be enough for you to understand there are real risks of a price reversion event setting up in the markets right now.  All we need to confirm this setup would be for a broader market breakdown event to begin to take place. Then, we would watch what happens to the SPY near the $295 to $300 level.

Please pay attention to this setup as our researchers believe this could be a much bigger event than many people believe.  Our research team believes a price reversion event is essential for the US stock market to continue to climb higher in 2020.  Thus, some type of downside price move MUST happen before we can attempt any further upside price advancement.

As a technical analysis and trader since 1997 I have been through a few bull/bear market cycles, I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

Join my Wealth Building Newsletter if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.

Chris Vermeulen
www.TheTechnicalTraders.com

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.  Visit our web site (www.thetechnicaltraders.com) to learn how to take advantage of our members-only research and trading signals.