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Trend Higher for the Nasdaq will it Hold?

The trend higher for the Nasdaq-100 remains intact from a technical standpoint. The Tech Traders Founder Chris Vermeulen joins Jill Malandrino on Nasdaq to talk about if the trend will hold or reverse.

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.

Critical Price Level Could Prompt A Big Move After Holiday

As technical traders and researchers, we’ve been paying very close attention to the GREEN ARC Fibonacci resistance level on the SPY as a key level for the US stock market and any hope of a continued upside price rally.  The SPY has traded near this level for the past three weeks and appears to be attempting a bit of an upside breakout right now.  Yet, we understand a long holiday weekend is upon us in the US, Memorial Day, and after a big upside GAP on Monday, the US stock market has stalled over the past few days.

Our researchers believe this GREEN ARC is still acting as critical price resistance and believe the SPY may sell off into the end of the week resulting in a failed attempt to breach this key resistance level.  If this happens, the failed attempt to break this resistance could prompt a change in price trend and initiate a new downside price trend.  If this resistance level is broken by the end of this week, then we have a pretty solid indicator that continued bullish price trending may continue.

Absent of any real news that may drive the market trend this holiday weekend and with most of the US still in shutdown mode, we believe the US stock market has continued to trade within this no man’s land area for many weeks now.  From the end of April till now, we’ve seen moderate upside price action in certain sectors, yet other sectors continue to show signs of weakness.

SPDR S&P500 ETF WEEKLY CHART

Before we continue, be sure to opt-in to our free market trend signals 
before closing this page, so you don’t miss our next special report!

TRANSPORTATION INDEX WEEKLY CHART

This Transportation Index Weekly chart is a perfect example of the weakness that is evident away from the S&P500, NASDAQ, and Dow Industrials.  Compare the last 6+ weeks of trading on this TRAN chart to the SPY chart above.  Notice that the TRAN chart shows a very congested sideways price channel (highlighted in YELLOW) as well as a much deeper upside price move from the lows near March 20.  While the US major indexes have rallied substantially, the broader market indexes are not experiencing the upside price advance and continue to suggest overall weakness.

This disconnect in the markets suggests speculation is driving the US major indexes higher and not real fundamental appreciation based on earnings and revenues.  When this speculation ends, typically when speculators realize the price has been driven a bit too high compared to reality, then the trend can change in an instant.

ISHARES RUSSELL 2000 ETF WEEKLY CHART

This IWM Russell 2000 ETF Weekly chart highlights a similarly week upside price rally since the March 20th bottom.  The WHITE LINE on this chart represents a support/resistance level from early trading low price levels in 2017.  Our research team believes these levels represent a very important support/resistance level for the Russell 2000 ETF as this level coincides with the GAP in price that was generated within the recent selloff on March 9, 2020.  That GAP cleared this key support/resistance level with a very big downside price move.  We believe this level will act as intense resistance as price attempts to fill the GAP.

CONCLUDING THOUGHTS:

Overall, the US stock market has continued to trade within this no man’s land recently.  There have been some pretty decent upside price moves in certain sectors over the past few weeks.  Precious metals, certain travel/leisure stocks, and, of course, technology and services stocks.  Yet, we continue to warn our friends and followers to be very aware that the US stock market is far from immune to more downside price activity.  A deep selloff like we experienced will very often react with a “recovery move” – a dead cat bounce type of move.  While the NQ has been a big mover, these other sectors suggest we may be nearing a tipping point and we urge technical traders to stay very aware of the risks as we head into this long holiday weekend.

I’ve been trading since 1997 and I’ve lived through numerous market events.  The one thing I teach my members is that risk is always a big part of trading and that’s why I structure all of my research and trading signals around “finding profits while reducing overall risks”.  Sure, there are fast profits to be made in these wild market swings, but those types of trades are extremely risky for most people – and I don’t know of anyone that wants to risk 50 or 60% of their assets on a few wild trades.

You don’t have to spend days or weeks trying to learn my system.  You don’t have to try to learn to make these decisions on your own or follow the markets 24/7 – I do that for you.  All you have to do is follow my research and trading signals and start benefiting from my research and trades.  My new mobile app makes it simple – download the app, sign in and everything is delivered to your phone, tablet, or desktop.

Please take a moment to visit www.TheTechnicalTraders.com to learn more.  I can’t say it any better than this…  I want to help you create success while helping you protect and preserve your wealth – it’s that simple.

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

Is Stock Market Volatility About to Spike Higher than March?

A very interesting setup is currently taking place in the VIX chart with our Adaptive Fibonacci Price Modeling system that has us quite concerned.  The Daily VIX chart running our Fibonacci Price Modeling system, which is one of our primary price modeling tools, is suggesting upside price targets for the VIX near 110, 134 and 158.  The reason these levels are extended into future price expectations is because of the recent explosion in volatility over the past 90 days.

Yet, the real concern originates from the question “what would it take for the VIX to rally to these levels and is this a real possibility in the current global markets?”.  So, we attempted to answer that question by attempting to identify what it would take for the VIX to skyrocket above 110 in the near future.

Before we continue, be sure to opt-in to our free market trend signals 
before closing this page, so you don’t miss our next special report!

VOLATILITY INDEX (VIX) DAILY CHART

First, pay attention to this VIX Daily chart and the targeted levels above 100.  Please understand that in order for the VIX to skyrocket higher reaching levels above 100 would require another massive downside price move in the US and global markets – something unexpected and very dramatic.  Is this an unrealistic expectation given the current global market environment headed into Q2 and Q3?  We really don’t believe it is an unrealistic potential expectation at this point.

We’ve recently authored a series of articles suggesting the global markets are marching through a human psychological process related to the virus event (crisis).  Somewhat similar to the “Grieving Process”, a crisis event prompts a similar set of human emotions ending in an angry and helpless feeling.  We believe this early stage crisis event process has positioned the global markets clearly within the Denial and Stigmatization phase of the crisis event. These are the Second and Third human responses to a major crisis event (Source: www.orau.gov/).

If we are correct and the markets are reacting to the Denial and Stigmatization phases of this virus event, then the next transitional phases are Fear and Withdrawal/Hopelessness.  Could this transition into a more fearful human instinct prompt a massive collapse in the US and global markets?  If so, what would be the cause of this transition into fear?

We believe the transition may come from the continued economic strain that is likely to become very evident in Q2 and Q3 of 2020.  Right now, the US stock market is only -10% to -15% from recent all-time highs.  The reality of the virus event for traders is that this is only a minor blip in the markets so far.  Yes, the markets fell much lower recently, but traders/investors have shrugged off the real risks and put their faith into the US Fed and global central banks to navigate a successful recovery.  What if that doesn’t happen as we expect?

What if the real numbers for Q2 and Q3 come in dramatically lower than expected?  What if global GDP contracts by -10% or -15% for the next 12+ months?  What if consumers don’t return as quickly as we expect?

The Race To Cash and Bonds Again: I talked with Cory Fleck from Korelin Economics Report today. Listen to our thoughts on the race to the safe-haven assets, bonds, and cash. What about gold and gold stocks? These have been more correlated to the US markets but the charts of the major stocks and gold are still very bullish.

CLICK TO HEAR OUR CONVERSATION

WEEKLY DOW (YM) CHART

Take a look at this Weekly YM Chart and pay attention to the downward sloping price channels that help guide us to a conclusion.  Additionally, the Adaptive Fibonacci Price Modeling system is showing us a new target near 12,475.  If this is accurate, then a breakdown in price over the next 6+ months may push the YM to levels near 12,500 (-50% from the recent peak in April 2020).  A move like this would certainly prompt a massive increase in the VIX and would frighten traders, investors, and consumers into a “helplessness” mentality.  What can you do when the markets are collapsing like this except wait for the bottom.

The one thing we can be certain of is that at long as humans exist on this planet, economies will continue to function at some level.  Being human in today’s world means we engage in economic activity and trade.  Therefore, we believe there is a moderate risk that the US and global markets have completely misinterpreted the true price valuations and expectations based on this research.  Simply put, we believe a Denial phase has taken root where investors and traders simply deny and ignore the real potential for future collapse.

I keep pounding my fists on the table hoping people can see what I am trying to warn them about, which is the next major market crash, much worse than what we saw in March. See this article and video for a super easy to understand the scenario that is playing out as we speak.

If you want to learn more about the Super-Cycles and Generational Cycles that are taking place in the markets right now, please take a minute to review our Change Your Thinking – Change Your Future book detailing our research into these super-cycles.  It is almost impossible to believe that our researchers called this move back in March 2019 in our book and reports.

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 going to be an incredible year for skilled traders.  Don’t miss all the incredible moves and trade setups.

Subscribers of my ETF 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. Yesterday we closed out SPY ETF trade taking advantage of this bounce and our account is at another all-time high value. Exciting times for us technical traders!

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my Active ETF Trading Newsletter.

We all have trading accounts, and while our trading accounts are important, 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 a time like this, you could lose 25-50% or more of your entire 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 and 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.

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 Long-Term Investing Signals which we issued a new signal for subscribers.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

The Next Big Breakout Trade: Large Cap Gold Stocks

This technical analysis video I put together has a lot of great trading opportunities in it while providing a lot of educational content to help you see the markets and trade in a way that will reduce your risk/exposure when needed.

I use my BAN trading strategy which is I focus on the Best Asset Now and only trade the sector, index, or commodity that has the least risk and most upside potential at the current moment.

I won’t lie, im super picky and conservative so trades are few and far between but as a swing trader, or any trader for that matter, the quality of a trade alert trumps quantity. Watch this video below and see what I provide my subscribers every morning before the opening bell. If you like it, then join us and become a technical trader today!

Before we continue, be sure to opt-in to our free market trend signals 
before closing this page, so you don’t miss our next special report!

I have to toot my own horn here a little because subscribers and I had our trading accounts close at a new high watermark for our accounts. We not only exited the equities market as it started to roll over, but we profited from the sell-off in a very controlled way, and yesterday we locked in more profits with our SPY ETF trade on this bounce.

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 going to be an incredible year for skilled traders.  Don’t miss all the incredible moves and trade setups.

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my Active ETF Trading Newsletter.

We all have trading accounts, and while our trading accounts are important, 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 a time like this, you could lose 25-50% or more of your entire 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 and 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.

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 Long-Term Investing Signals which we issued a new signal for subscribers.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

AI Trading System Using Fibonacci Theory Forecasts Future Gold, Silver & Stock prices – Part IV

As we’ve attempted to illustrate the intuitive nature of the Adaptive Fibonacci Price Modeling system we as one of the tools to help us understand the markets and price setups, we now want to more clearly illustrate other components of the current global economic environment.  We want to illustrate just how deep the current price move resonates against historical price norms.

In Part I of this article, we highlighted the Fibonacci system running on the ES (S&P 500) charts.  The point of this example was to show that a new price low had already been established and a recent new price high (the all-time high peak) was now acting as a critical price peak.  This suggests we are in the process of establishing a much deeper price low (bottom) that may come over the next few weeks as price attempts to “revalue” current economic expectations.

In Part II of this article, we highlighted the Fibonacci Price Theory concepts and attempted to teach you how to identify major and minor Fibonacci price pivot points.  This was done to help you understand what we are attempting to share with you and to help you learn to use these techniques in the future.  The conclusion of that, Part II, shared our expectations that a new, deeper low, would likely set up in the ES and NQ markets as price attempts to establish a future bottom setup.

In Part III of this article, we shared with you the NQ (Nasdaq) Fibonacci price analysis which was similar to the ES charts.  We are attempting to share with you the reality that price will setup intermediate high and low price pivots over time.  But we are really trying to explain how the major price pivots have now set up as a massive warning that a deeper low may be targeted as long as price fails to recover to levels near the all-time highs.  As “obvious” as that may seem to you now, many traders are already entering the markets expecting a recovery similar to May 2018 or January 2019 to begin.  We urge you to reconsider the scope of this disruption of the global economy.

Before we continue, be sure to opt-in to our free market trend signals 
before closing this page, so you don’t miss our next special report!

WEEKLY CHART OF OUR CUSTOM SMART CASH INDEX

The first chart we want to share with you is a Weekly chart of our Custom Smart Cash Index.  This chart clearly illustrates just how destructive the recent collapse in the global economy has been.  Previous downside price rotations (Feb 2018 & October~December 2018) prompted downside price moves that stayed within the upward sloping price channel established from the 2015~2016 price range setup.

We believe this new downside price cycle will establish a new support channel for future price growth that may include a transition away from traditional economic measures.  Essentially, a “new normal” related to debt and economic expectations.

We believe this COVID-19 virus event may be unwinding a large portion of capital appreciation that originated back in 2000~2002 – after the DOT COM and 9/11 Terrorist attacks in NY.  Since that time, the US Fed and global central banks have engaged in a series of QE experiments designed to spark economic activity.  We believe the core element of the current COVID-19 economic contagion is not related to the central bank’s inability to print more money to throw at the problems in the markets.  The problem exists that a healthy market must remove risky debt/credit issues and unhealthy deficits in order to sustain real forward growth opportunities.  See this ZeroHedge article for a clear example of what we are attempting to explain: www.zerohedge.com

Looking at some of the charts from the ZeroHedge article, it becomes clear that real economic growth (in relation to proper debt expansion and economic function) likely completed a transitional cycle end near 1999~2002.  This came after the US Fed reached peak interest rate levels in the early 1980s and began a deficit spending binge that continues till today.  As credit/debt became the new norm, we can see how the expansion of credit created a broader expansion of capital valuation levels (global stock market prices) and provided for an expansion of derivatives and global shadow banking operations.  Debt begot more debt/credit – which begot more debt/credit.  And the cycle continues until it breaks.

(Source: https://www.zerohedge.com/markets/debt-chasm-just-too-big-fed-fill)

We believe the unwinding process of the global credit market is really just beginning.  The COVID-19 virus event was just the catalyst for this event.  The virus event prompted a collapse in the global economy because of the global economic shutdown that took place to prevent the spread of the virus.  This shutdown strained the global economic/credit market and continues to do so today, by exposing many at-risk companies and business enterprises that were operating on the “fringe” – that space where lack of consumer engagement creates a void in income while debt levels continue to plague future operations.  We believe this process of UN-leveraging debt will continue until the markets decide a suitable amount of risk has been removed from the markets.  This is when global economic expansion and growth will begin to take hold.

WEEKLY CUSTOM VOLATILITY INDEX – DELEVERAGING IS THE NEW NORMAL

This Weekly Custom Volatility Index highlights the potential for a “new normal” range as the recent deep low levels on this chart suggests a “deleveraging” process is currently taking place.  Even as the US Fed and global central banks pour trillions into the markets, this Custom Volatility Index continues to suggest deleveraging is still ongoing throughout the global markets.  Our research team believes the US Fed and global central banks are simply sucking up the immediate risk “froth” in the global markets while the “real meat” of the issue still persists.

PRECIOUS METALS ANALYSIS POINTS TO HIGHER PRICES LONG TERM

This analysis leads us to Precious Metals – yes, we know, everyone is talking about Gold and Silver right now.  Yet, the real reason we are talking about Gold and Silver is because we believe the current economic environment will present an incredible (once in a lifetime) opportunity for skilled traders.  Once you truly understand the process that is taking place throughout the globe and how debt/credit expansion over the past 45+ years has propelled the capital markets to massive highs while the metals market has been ignored.

Recently, Gold has rallied to a 6+ year high and Silver is still trading near multi-year lows.  The reality is that the global stock market is about to experience a credit/debt revaluation event that is unlike anything we’ve seen since 1929 and/or WWII.  Precious metals are about to enter a phase that has never been experienced in recent history.  What happens to safe-havens throughout the process of a global market credit/debt crisis event?  What happens to metals as the global economy attempts to wash-away excessive debt, derivatives and shadow banking risks that have built up over the past 40+ years?

CONCLUDING THOUGHTS:

If we are correct and our Fibonacci price modeling systems are correct, a deeper price low in the global markets is about to set up that will attempt to force a “wash-out” event in the global credit/debt markets.  This process will likely send precious metals skyrocketing higher.  The unknowns of this process are the same unknowns that happened after 1929 & WWII – what will the new financial functions and societal structure be composed of?  Until that side of the future becomes more clear, expect a number of unknown factors to continue to drive excessive volatility and risk in the global markets.

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 going to be an incredible year for skilled traders.  Don’t miss all the incredible moves and trade setups.

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my Active ETF Trading Newsletter.

We all have trading accounts, and while our trading accounts are important, 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 a time like this, you could lose 25-50% or more of your entire 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 and 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.

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 Long-Term Investing Signals which we issued a new signal for subscribers.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

The Selloff Structure Explained – Fibonacci On Deck

Many traders become very emotional when the markets turn Bearish and fail to properly understand that price structure is still driving market price movement.  This morning, I highlighted this structure to my subscribers attempting to alert them to the possibility that the markets could recover moderately over the next 3 to 5+ days attempting to set up the next “waterfall” downside price event.

On January 29, 2020, I posted a research article detailing my belief that a “waterfall” type of event was setting up in the markets.  This article was nearly 30 days prior to the peak in the markets.  It explained how events take place and how markets tend to develop a moderate recovery phase between selloff price declines.

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

Skilled traders should notice the size and levels of each selloff event in the chart (above) and pay very close attention to how price initially collapsed from the peak, then recovered nearly 50% in early and late November before finally setting up a deeper waterfall price collapse in early December.

Our research team believes the US stock markets may attempt something similar over the next 3 to 5+ days as the Covid-19 economic outcome continues to process through the global markets.

The US and other Central Banks have taken broad steps to attempt to overcome the negative economic outcomes related to the Covid-19 global shutdown.  Their biggest concern is that consumer activity could diminish and banking/credit firms could come under severe pressures because of a consumer collapse.

There are over 35 million US low-wage jobs that may become at-risk because of the Covid-19 virus event.  We believe the true economic contagion of the global virus event may now be known until well into April or May 2020.  Yet we believe these at-risk, low-wage jobs are prevalent throughout the globe and foreign nations, such as Asia and Europe, may experience a similar consumer economic contagion over the next 6+ months.

Before you continue, be sure to opt-in to our free market trend signals 
before closing this page, so you don’t miss our next special report!

We believe the data related to the Covid-19 economic crisis will not fully be known until well into April or May 2020.  Because of this, we believe the US stock markets may recover to levels near the 50% Fibonacci Retracement levels on these charts before attempting a series of further downside price moves.  Skilled traders should not become overly emotional right now and pay attention to the structure of the price action as well as other technical conditions in play at the moment.  Our objective is to execute trades with a highly targets success rate – not to trade on emotions.

SPY DAILY CHART

This SPY Daily chart shows the SPY would only need to rally 18.70 points to reach the 50% Fibonacci retracement level on this chart.  This could happen very quickly given how close the price actually is to this key Fibonacci level.  If that were to happen over the next 3 to 5+ trading days, the downward sloping price channels from our TTCharger modeling system would move lower to meet price near 278 – which would set up a new resistance zone and possibly a new wave of selling.

INDU DAILY CHART

This INDU Daily chart shows the Dow Jones would have to rally about 2025 points (to levels near 23,886) to reach the 50% Fibonacci Retracement target.  If this were to happen, the sloping price channels on this chart would likely move lower to meet price near this 50% target level – presenting a very clear resistance zone for a new wave of selling to begin.

Remember, it is not about emotions or attempting to try to force the markets to adopt your “belief”.  Skilled traders attempt to identify risks, opportunities and realistic technical setups that allow them to objectively determine where and when the markets are providing a real opportunity for success.

We may be just a few days away from the next major wave of selling, yet any trader who jumped into an emotional trader over the past 5+ days expecting the markets to continue to break down is likely under a fair amount of stress right now.  Learn to read the charts and the structure of price more effectively and you’ll find the answers are already on the charts in front of you.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

If you are a more active trader and swing trader visit my Active ETF Trading Newsletter. If you are a long-term investor looking for signals when to own equities, bonds, or cash, be sure to look into my Long-Term Investing Signals.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

These Index Charts Will Calm You Down

I put together this video that will calm you down, because knowing where are within the stock market cycles, and the economy makes all the difference.

This is the worst time to be starting a business that’s for sure. I have talked about this is past videos and events I attended that bear markets are fantastic opportunities if you can retain your capital until late in the bear market cycle. If you can do this, you will find countless opportunities to invest money. From buying businesses, franchises, real estate, equipment, and stocks at a considerable discount that would make today’s prices look ridiculous (which they are).

Take a quick watch of this video because it shows you what I expect to happen over the next 3-6 months, and beyond and it goes against what everyone else is thinking.

Before you continue, be sure to opt-in to our free market trend signals 
before closing this page, so you don’t miss my next special update!

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

Visit my ETF Wealth Building Newsletter and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
www.TheTechnicalTraders.com

Four Key Questions To This Crisis Everyone is Asking

Recently, I was asked to participate in a live radio talk with Arnold Gay and Yasmin Wonkers at Money 89.3 Asia First and was sent the following questions to prepare for the show.  I thought this would be a great way to share my thoughts and expectations related to the Covid-19 virus, global economics and what the Central Banks are doing to combat this virus economic event.

The reality is that the bottom in the markets won’t set up until fear subsides and the unknowns related to this virus event are behind us.  Until then, the global markets will attempt to seek out the true valuation levels based on this fear and the unknowns.  This means true valuation could be much further away from current price levels as the virus event is still very fluid in nature.

I’ve included a few of our custom index charts to highlight exactly where the markets are currently situated and have attempted to explain my thinking related to these charts.  Please continue reading.

First, be sure to opt-in to our free market trend signals before closing this page, so you don’t miss our next special report!

CUSTOM SMART CASH INDEX WEEKLY CHART

This first chart is our Custom Smart Cash Index Weekly Chart.  We had been expecting a breakdown in the US stock market last August/September 2019 (near the origination point of the line on the RSI pane) as our Super-Cycle system indicated a major breakdown was likely near the end of 2019 and into early 2020.

As the US Fed started pumping credit into the Repo market and the US/China trade deal settled over many months, a zombie-like price rally pushed prices higher through December 2019 and into early 2020.  We alerted our members that this was likely a blow-off rally and to prepare for greater risks.

You can see how dramatic the change in trend actually is on this chart.  We have broken the upward sloping price channel and moved all the way to the lower range of the GREEN downward sloping price channel.  This is HUGE.  Near these levels, we believe the US stock market will attempt to find support while continuing to rotate and setup additional “waterfall downside price events”.  These custom indexes help us to understand the “hidden side” of the market price action.

Chart by TradingView

WEEKLY CUSTOM US STOCK MARKET INDEX

This next Weekly chart is the Custom US Stock Market Index and we want you to pay very close attention to the fact that the recent lows have come all the way down to reach the upper range of the 2016 trading range.  Once the 2018 lows were breached, we knew the markets were setting up for a deeper downside price move.

We do believe this current level is likely to prompt some type of “Dead Cat Bounce” or moderate support though.  The entire range of 2016 (low, midpoint and high) are very much in play right now as these represent the current support levels for the US stock market.  We do believe some moderate support will be found near these levels – yet we have to wait for the price to confirm this bottom setup.

Chart by TradingView

WEEKLY CUSTOM VOLATILITY INDEX

This is our Weekly Custom Volatility Index and the extremely low price level on this chart suggests the US stock market may attempt to try to find moderate support soon.  We have not seen levels this low since 2009.  If the markets continue to push lower, this Custom Index will continue to stay below 6.0 as the price continues to decline.  Yet, we believe this extremely low price level may set up a bit of support near recent lows (within the 2016 range) and may set up a sideways FLAG formation before the next downside price leg.

Chart by TradingView

Please continue reading the questions (below) and answers/thoughts to those questions (below the questions).  We certainly hope this information helps you to understand and prepare for the next 6 to 12+ months as we believe the volatility and unknowns will persist for at least another 4 to 6+ months. But keep in mind the market dynamics change on a daily and weekly basis and if you want to safely navigate them and have a profitable year follow my analysis and ETF trades here

QUESTIONS:

1. Rates at zero, massive injections and coordinated central bank action… why isn’t the market convinced the situation is under control?

2. What are investors looking for now – A peak in coronavirus infection rates? A sense that a proper healthcare response is in place and won’t be overwhelmed?

3. The main issue seems to be that this is not a slowdown, but the sudden closure of economic activity, do you see massive fiscal support coming, including bailouts for sectors like airlines?

4. Do you get a sense that the White House finally gets it, and is now moving to reassure markets and ordinary Americans?

ANSWERS/THOUGHTS:

The markets are not reacting to what the global central banks are doing right now and probably won’t react positively until two things happen: fear of the unknown subsides across the globe and the total scope of the global economic destruction is assessed (think of this as TRUE PRICE VALUATION).  Right now, we are in the midst of a self-actuating supply and demand-side economic contraction that will result in a renewed valuation level as markets digest the ongoing efforts to contain/stop this virus.  Where is the bottom, I have an idea of where the bottom might setup – but the price will be what dictates if that becomes true.

If 2018 lows fail to hold as a support level, then we are very likely going to attempt to reach the 2016 trading range and I believe the midpoint and low price range of 2016 are excellent support levels for the market. I show the SP500, Nasdaq and Dow Jones index analysis and prediction in this video below.

What we are looking for in terms of closure of this event (or at least a pathway out of it) is some type of established containment of the event, the spread of the infections and the ability for governments and economies to begin to advance forward again.  As long as we are stuck in reverse and do not have any real control of the forward objective (meaning consumers, corporations and governments are reacting to this event), then we will have no opportunity to properly estimate forward expectations and advancement in local and global economies – and that is the real problem.

The White House and most governments get it and are not missing any data with regards to this virus event.  I truly believe that once this virus event ends and the general population gets back to “business as normal”, the world’s economy will, fairly quickly, return to some form of normal – with advancing expectations, new technology and continued global economic and banking functions.  Until that happens, which is the effective containment and control of this virus event, then no amount of money or speech writing is going to change anything.

Far too many people are acting emotionally and afraid right now.  The facts are simple; until we get a proper handle on this virus event, there will continue to be extended threats to our economy, people, families and almost every aspect of our infrastructure, banking, society and more.  Once the virus event is mostly contained and settled, then we can get back to business cleaning up this mess and finding our way forward.

I’m not worried too much, my research team and I advised our clients to move into bonds and cash before the drop in equities and have been warning our members of a “zombie-rally) for the past 5+ months which took place as expected.  We called for a “volatile 2020 with a very strong potential for a breakdown in global markets” near August 2019.  This is playing out almost exactly like we expected (except we had no idea a virus event would be the cause).

I firmly believe the global leaders and dozens of technology firms will have a vaccine and new medical advancements to address the Covid-19 virus.  I believe this event will be mostly behind us in about 90+ days.  What happens at that point is still unknown, but I believe we will be able to see a pathway forward and I believe all nations will work together to strengthen our future.

In closing, I urge everyone to try to relax a bit and understand this is a broad (global) market event with a bunch of unknowns.  It is not like the Fed can just throw money at this problem and make it go away.  This is going to be a process where multiple nations and various industries and groups of people will have to work together to reduce and eliminate this threat.  Because of that, there are no real clear answers right now – other than to be prepared for a few months of quarantine to be safe.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

Visit my ETF Wealth Building Newsletter and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
www.TheTechnicalTraders.com

Is This A Bear Market When Stocks Crash 20% and Bonds Spike 30%

It is another blood bath in the markets with everything down, including TLT (bonds) and gold. Safe havens falling with stocks is not a good sign as people are not comfortable owning anything, even the safe havens, and this to me is a very bearish sign.

Now, with that said, this is one day one of this type of price action and one day does not constitute a new trend or change the game, but if we start seeing more of this happen, we could be on the verge of the bear market we have all been expecting to show it ugly face.

The SP500 (SPY) is down 19.5% from the all-time high we saw just three weeks ago, and the general bias for most people is once the market is down 20% that is a new bear market. I can’t entirely agree with that general rule. Still, a lot of damage is happening to the charts. If price lingers down here or trades sideways for a few months I will see it as a new bear market consolidation before it heads lower, and we start what could be very deep market selloff and test 2100 on the SP500 index (SPY $210) for the next leg down looking forward several months.

20% STOCK MARKET CORRECTION ARE NOT BEARISH

Just because the markets have a deep correction of 20% does not mean its game over for stocks. Just take a look at the chart below on what happened the last time the market corrected 20%. As you can see, they were the biggest and best investor opportunities over the past 12 years. Today, my friend called and said they heard on the news that we are now officially in a bear market, and what should he do?

20% CORRECTIONS CAN TURN INTO A BEAR MARKET – BE READY

The SP500 fell 20% in 2001 and again from the 2007 high its lows, then bounce 10% – 14 over the next few months before rolling over to start its first bear market leg. I feel something similar will happen this time, which would put us a few months before the price should test these lows again and breakdown to give us optimal time to reposition our long term portfolio.

Once we do start a bear market, you will notice price moves very differently from what we have experienced over the past 12 years. How you trade now likely will be a struggle to make money. If you try to trade bonds, they are relatively tricky because of how they move during a bear market. The stock market can fall for a year, and bonds are still trading at or below the price they were when the bear market started. This different price action is what happened in 2001-2002, and again in 2008.

BONDS GO BALLISTIC

Bonds also take on the price action similar to how the VIX trades with violent price spikes only to fade back down again quickly, and this generally happens near the end of a bear market, or extreme selloff like we are in now. Heck bonds (TLT) jumped 30% just in the past few weeks, we caught it, but most traders missed this move. You need to understanding market sentiment and how to trade bear market type price action because that is how the market is moving this week, and trading/chart patterns become more sentiment-driven than logical trading setups and trades become counterintuitive.

I also traded GDXJ for a 9.5% gain and closed that position at open for the high tick with my followers, and we didn’t follow my proven trading rules for price targets, trailing stops, and reading the market sentiment we could be down over 30% today which I know many traders are simply because they lack control of their trading (no defined rules, fall in love with positions). I’ll be doing a detailed gold and gold miners article so stay tuned!

Be sure to opt-in to our free market trend signals before closing this page, so you don’t miss our next special report!

CONCLUDING THOUGHTS:

I share this analysis, not to scare you, but let you know where we stand. The stock market is treading on thin ice, and if/when it breaks down, a new bear market will have started. Remember, we are still in a bull market, but the coronavirus is stopping businesses, which means earnings will be poor, and that is why stocks are falling. Investors know stocks are worth less money if they make less money; it is that simple.

The type of market condition I think we have entered could be here for a while, a year or three, and it’s going to be a traders market, which means you must have a trading strategy, plan your trades, and trade your plan. It’s amazing how simple a few trading rules are written down on paper can save you thousands of dollars a year from locking in gains, or cutting losses. I have this mini trading strategy mastery course if you want to take control of your trades and override your emotional issues. It’s easy to hold winners until they turn into losers, taking to large of a position, or maybe you have masted the art of buying high and selling low repeatedly? Yikes! It happens to most traders, and it can easily be overcome with a logical game plan I cover in the crash course, pun intended 🙂

Someone yesterday I spoke with said that in the USA alone already had 10,000 people die just from common influenza, yet here we are freaking out over 17 dead in the USA. Sure, its bad news, but the common sicknesses for older citizens makes coronavirus seems a little blown out of proportion. There are conspiracy theories out there and this could be bioweapon which is scary and I am no expert in this field but my sources are not concerned with the Conornavirus. I want to think a cure gets found soon, and if so, the markets will rebound with a vengeance, and we can relax.

In short, if you have lost money with your trading account this year, holding some big losing trades that were big winners just a couple of weeks ago, I think it’s worth joining my trading newsletter so you can stay on top of the markets. I take the loud, emotional, and complex market and deliver simple common sense commentary and a couple of winning trades each month.

My trading is nothing extreme or crazy exciting because I’m not an adrenaline trading junky. I only want to grow my entire portfolio 2-4% a month with a couple of conservative ETF trades and make a 22%-48% return on my capital without the stress of being caught up in this type of market and feeling like I always need to be in a trade.

Happy Trading!

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

Why You May Want to Avoid Buying Options This Week

If you do not understand implied volatility and you are buying put or call options or some combination, you have been warned!

The market continues to move very fast, has large swings, and one would think that makes it an excellent time to buy options for huge gains, right? Our Research Team believes that large Volatility swings will be here for a while. Once you understand the significant role Volatility plays in Option Pricing, you may want to avoid this investment construct for some time to come.

The VIX is at an extreme level and has only been over 50 only seven times in the past 25 years based on a daily closing price. It evident the last two trading sessions the investment sentiment has been bearish and option puts make money if price declines, which has been the popular trade of choice until now.

What many options traders do not understand, however, is that the price of options is configured using implied volatility.

The more volatility, the more expensive the options become to factor in the wild swings the underlying security may experience. This is reflected in the price the option trades off to factor in the fear and trepidation.

This can be seen in the substantial premium on top of the intrinsic pricing from the strike price.

Be sure to opt-in to our free market trend signals before closing this page, so you don’t miss our next special report!

For example, bank stocks are usually considered very conservative when implied volatility is under 20. This results in options being priced accordingly.

However, in the last few trading sessions, volatility has jumped, reaching 62 at one point this week already, which is more than 3x what you would want when simply buying options. This is a VERY HIGH RISK and a difficult time to buy options. Unfortunately, this is what most options traders do, they BUY options, and while it may work in most market conditions, this is most likely NOT the time you want to do so until such time Volatility and VIX begin to subside and we do not see that in the near future.

Let me try to explain in the most basic laymen terms because I know 95% of options trades don’t really get this, and it boggles my mind. As you know, or should know, buying options is one of the riskiest and hardest ways to profit from the market, in my opinion (and statistics continue to prove this out as MOST option buyers LOSE money). I traded options years ago and do very little options trading now, though they are still a great way to make money with certain trade setups and in certain market conditions.

OPTIONS RISK #1: TIME DECAY/THETA

In short, trying to time the market with an index, stock, sector, commodity, or currency is hard enough, but when you buy options, you make things a whole lot harder for yourself. Not only do you need to time this almost perfectly so that the underlying asset has time to move, but you need to time it with precision because now the time is your enemy (Theta).

Every day the option contract you bought is going to lose value because you lose time, and there are fewer days left for your asset to move in the direction to make up for the large premium embedded in the option price. Each day this time premium begins to erode. The closer you get to the time expiration, the faster the time premium decays.

OPTIONS RISK #2: IMPLIED VOLATILITY

This is the main issue I want to share and the reason for writing this article for you.

If options are valued in relation to implied volatility (which they are), then when the volatility is above 50 (62 as of Monday, March 9) and the option is worth $1,00.

Here is the issue, even if the price of your asset stays the same, but the fear in the market fades away as it always does from this extreme level, your option value will decline dramatically. I’m just using numbers out of thin air for the example so you can grasp the issues easily.

If implied volatility drops from 62 down to 35, the option contract value will go down with the volatility as well. The $1.00 contract priced with huge volatility could now be worth $0.85 overnight.

If you traded a short-term option contract, then you will also have time decay, and your option would drop even more to say $0.82.

Remember this is the type of price action you will experience and the VIX falling (and fear subsiding) and even if your asset price just stays the same you have the potential for a significant loss and is the reason why buying options during extreme high volatility is not the trade that should be taken.

OPTIONS TRADING TIP

If implied volatility is over 25 then 
it is usually better to be a seller of options, 
if it’s under 25, then its often better to be a buyer.

So what does a trader do? 

We encourage investors to use probabilities to work in your favor!

You could put on debit spreads: This way, some of the volatility is reduced as you sell a put or call, so the volatility premium is now in your favor, and time decay is mitigated.

OR

Sell it to those people that are so sure of this big move!

We have already identified that we are in a period where the VIX in an area very rarely seen. But since the VIX can stay here for a while, a more logical option move may be to sell calls going out into the future. Due to contango, it will retrace back down as the contango effect will begin to change as trader sentiment improves, and fear is reduced.

Credit spreads have so many advantages over simply buying calls and puts

  • Defined risk – Can only lose the difference of your strikes less the premium received.
  • If the trade starts to go against, you have backup options to manage risk.
  • Roll the trade to a future date giving your trade time to work out.
  • Sell another option spread opposite of your existing trade (if a put spread on place a credit call spread, this creates an iron condor) now giving you a larger cushion for the trade to work as you received more premium.
  • Buyback the offending strike at a loss and let the profitable strike run if you feel it has legs.
  • Buy a put to defend your spread further out in time as theta decay does not get affected as quickly.
  • Use a stop loss of 2x or 3x premium received etc.
  • or take possession of the stock
  • Income – selling out of the money credit spreads can be an effective way of generating a passive revenue stream

RISK REWARD is most important, and it is critical to get into the right trade at the right time. Remember that theta-neutral trades and buying options are when implied volatility is low. Selling options, when implied volatility is high, is your best option.

  • This is where we are right now.

I hope this helps shed some light on the basics of why buying options during high volatility is an uphill battle, no matter how good your timing is to predict the movement of the underlying asset you are trading.

In the near future, my team and I will make our options trades available to follow. As you know, timing the market is our specialty. Knowing what time frame an asset will rally or breakdown, and how far its first move will give us a distinct advantage to pinpoint the ideal option contracts to consider buying or selling for maximum short-term gains.

Happy Trading!

Chris Vermeulen
 www.TheTechnicalTraders.com