Is The Technology Sector Setting Up For A Crash? Part I

One thing that continues to amaze our research team is the total scale and scope of the Capital Shift which is taking place across the globe.  For almost 5+ years, foreign investors have been piling into the US stock market chasing the stronger US dollar and continued advancement of US share prices.  It is almost like there is no other place on the planet that will allow investors to pool capital into such a variety of strong assets while protecting against foreign capital risks.  Yet the one big question remains – when will a price reversion event hit the US stock market?

So many researchers, even our team of researchers, believe we have found the keys to unlocking when the price reversion event will take place.  Time-honored technical analysis techniques have set up very clear triggers that were negated by higher prices and continued upside trending.  What is certain at this point is that the Capital Shift is going to continue until it stops – at some point in the future.

Our research team decided to take a look at the FANG index and the individual symbols that make up that sector to see where the real strength and weakness exist.  Our goal was to attempt to understand how and when a potential price reversion event may take place and how this event may be correlated to the global contraction event related to the Coronavirus spreading across the planed while paralyzing certain economies.  Could the Coronavirus event be the catalyst that sets off a breakdown in the technology sector?

There are three components we want to start our focus on in this, Part I, of this research article.  First, the very real possibility that we are “rallying to a peak” at some point in the near future.  Second, the Custom Volatility Index highlighting continued overbought price action and the very real potential for a breakdown in price from these inflated levels.  Lastly, the FANG index itself suggesting we are very near to upper price boundaries after capital has poured back into the US markets in early 2020.

These three components suggest a market that is full of over-enthusiastic optimism and capital that has poured into the US stock market chasing gains that were clearly expected as 2019 came to a close.  Yet, in early 2020, a new risk suddenly became known, the Coronavirus, and this risk has already begun to devastate China’s economy and economic activity.  What happens if this sudden collapse in economic activity spreads over the next 30+ days and how will it change future expectations in the US stock markets?

CUSTOM TECHNOLOGY INDEX WEEKLY CHART

This Custom Technology Index Weekly chart highlights what we clearly believe is the “rally to the peak” type of price action related to the continued Capital Shift taking place in the global markets.  The breakout to the upside in November 2019 prompted a concentrated pooling of capital into the US markets.  After the end of the year, when institutional investors started engaging in the markets again, it was rumored that more than multiple-billions reentered the markets in early January 2020.  It is obvious when you look at this chart.

By the second week of the new year, capital continued to pour into the technology sector – pushing it higher by nearly 15% in less than 45 days.  That is an amazing rally to start off 2020 and could possibly be the “rally to the peak” process we’ve been hinting about.

CUSTOM VOLATILITY INDEX WEEKLY CHART

This Custom Volatility Index Weekly Chart is something we use to determine how overbought or oversold the US stock market is in relation to historical VIX weighted price ranges.  When this index is above the GREEN middle range, the US stock market is reaching into extremely bullish trending and overbought territory.  When this index is below the GREEN middle range, the US stock market is reaching extreme bearish trending and oversold territory.  The GREEN middle range is a neutral zone for trading.

Obviously, as VIX spikes and price levels collapse, we can see this Custom Volatility Index falling to levels below 6.0.  As price trends higher with moderately low VIX levels, we continue to see this Custom Volatility Index hover above 12~14.  The downside rotation in the US stock market (the -600 pt Dow day) pushed this Custom Volatility Index from near 22 to 14 – a big reversion event on this chart.  Now, the current level is back above 18 and pushing higher – the rally to the peak is setting up.

FANG WEEKLY CHART

Lastly, this FANG Weekly chart highlights the concentration of capital that has pushed the technology sector, and particularly the FANG stocks, much higher in 2020.  The reality of the situation is that until forward expectations, guidance or global economic functions change, this rally will likely continue for some time.  Our concern is that global market expectations could change very quickly in relative terms because of global economic functions and contractions related to the Corona Virus.

We recently authored an article suggesting that the entire Belt Road sector could become a risk factor if China is pushed into a very deep economic crisis.  China’s banking sector recently underwent a stress test where China’s economy dipped below expected GDP levels.  Nearly 15% of China’s banks will become insolvent if GDP drops below 5.5%.  Nearly 50% of China’s banks will become insolvent if GDP drops below 4.5%.  What happens if China’s GDP drops to 0.5% for a 4 to a 6-month span of time and the Chinese economy sputters in recovery after this Coronavirus event settles?

What happens to the Belt Road Initiative and the projects/relationships China has with those nations if, all a sudden, China enters a “Credit Crisis” in excess of $5 to $6 trillion US dollars.  Bloomberg recently reported that China Home Sales plunged 90% in the first week of February.  You don’t have to be a genius to understand the risks associated with that type of plunge in a key economic growth component.

If our research team is correct, this “rally to the peak” will continue in the US for as long as risk factors stay mildly calm for the US.  Once risk levels elevate across to a point where the US investors and economy may become threatened, then traders will likely begin to bail out of overvalued sectors, like Technology, and into safe-haven investments.  It is critical that skilled traders be prepared for this move because when it happened, it may happen very quickly and violently.

Join my Market Timing Signals Alert 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.

Shipping Rates Plunge, Commodities and Stocks May Follow

An almost immediate reaction to the Coronavirus outbreak in China and throughout most of the world has sent shock-wave through the global markets – particularly seen in Shipping and Oil.  The actions within China to attempt to contain the virus spread include shutting down entire cities and setting up mass quarantine events.  It is estimated that as many as 8+ million people were quarantined within cities in China throughout the Chinese New Year.

Chinese President, Xi Jinping, warned recently that the Coronavirus, and the efforts to stop it, may greatly reduce the Chinese economy over the next few months.  The Chinese President urged top officials to refrain from “more restrictive measures” to contain the virus.  It is our opinion that more restrictive measures are essential to efforts to contain the spread of this virus and that further contraction in the Chinese economy, as well as other economies, are almost set in stone at this point.

Information we’ve received from some friends living in China and Hong Kong suggest travel is very restricted, face masks are very scarce, people are staying inside their homes and surviving as family units within very close contact with one another.  They are scared, trapped and unable to do anything other than try to wait this out.  Imagine what this is doing to the local economies, shops, offices, and businesses?

Reflectively, global shipping rates have collapsed over the past 30+ days as one of the first signs of the contraction in the global markets.  As of December 31, 2019, both Tanker and Dry-Bulk rates were hovering near $14,000 per day.  Now, this rate is near $2500 per day – a -82% decrease.  As you consider the broader aspects of this massive decrease in shipping rates, consider the global contagion event that may setup if the Belt-Road region is adversely hit with the Corona Virus.

Source: Bloomberg.com

SEA SHIPPING SECTOR ETF – DAILY CHART

Shipping stocks are taking a beating. Factories are shut down, the product is not being shipped, and even product ready to be shipped many don’t want to take delivery for the time being.

From a short term standpoint, this sector is looking oversold, but depending on how much the virus spreads we could see another 20% from the current price.

CHINA’S BELT-ROAD INFRASTRUCTURE PROJECTS

China’s Belt-Road Initiative consists of massive infrastructure, port, and other projects throughout Europe, Asia, India, Pakistan, Iran, Turkey, Russia, Africa, and other nations.  These projects have been initiated over the past 5+ years and are well underway.  We believe the spread of the Coronavirus may follow a path along with the Belt and Road projects and potentially infect a larger number of individuals over the next 30+ days than originally expected.  If this virus moves into the Middle East or Africa, containment may become very difficult.

The reality is that Shipping and Commodities could see a dramatic price decline as this virus outbreak continues over the next 60+ days.  Reports are already starting to hit the news wires that Autos and manufacturing supplies are starting to pile up and ports in China.  Without a functioning manufacturing sector and workers to keep everything running, China’s economy will grind to a halt very quickly.

This translates into lower Oil prices, lower raw material prices and higher metals prices.  A capital shift will continue to take place throughout the world where capital will move away from risky environments and towards more secure investment environments.  Thus, capital will move away from Asia, India, the Middle East and potentially Europe and towards the USA, Canada and possibly Mexico.  Everything depends on what happens over the next 60 to 90+ days with regards to this virus outbreak.

MONTHLY CRUDE OIL CHART

This Monthly Crude Oil chart shows how quickly Oil rotated lower in January 2020.  Currently, Oil is trading near $50 per barrel and may break lower towards the $44 to $46 price level before finding any real support.  Overall, our research team believes Oil may reach as low as $35 to $36 ppb before reaching a bottom.  You can read our earlier research here: https://www.thetechnicaltraders.com/oil-begins-to-move-lower-will-our-predictions-come-true.  Within that research post, dated November 19, 2019, we highlighted our earlier predictive modeling research from July 2019 suggesting Oil would break substantially lower in November 2019 and again in February 2020.  We predicted this downside move in Oil nearly 8+ before it happened.

Transportation Index Monthly Chart

This Transportation Index Monthly chart highlights the sideways FLAG formation setting up in the US Transportation sector.  If the US market breaks lower as a result of lower global economic activity, we believe we will see the Transportation Index fall very quickly to levels below $9,500.  A breakdown in the Transportation Index would be an early warning sign that the US economy is headed towards a recession or contraction event.  Global shipping has already confirmed this event is taking place – yet the US Transportation sector has not shown much weakness.

Traders need to be very aware of the risks in the markets and the continued Capital Shift that is taking place throughout the planet.  Capital is running away from risk and pouring into more stable markets.  The ultimate risks to the global economy are for those nations where debt/economy levels are fragile, to begin with – which is why we highlighted the Belt Road project.  If China enters a protective mode where the Chinese Central Bank attempts to bail out Chinese companies/initiatives, we believe the Belt Road project could become a great risk.  And we believe this could happen very quickly given the current market environment.

The dynamics of global markets are changing very quickly.  It is time for traders to prepare for bigger volatility and large range sector rotation.  Follow our research, learn how we can help you stay ahead of these bigger moves in the markets.  2020 is going to be a fantastic year for skilled traders – you just have to stay ahead of the risks and be prepared to take advantage of the opportunities as they are presented.

Join my Swing Trading ETF 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.

2020 – A Close Look At What To Expect

Quite a bit has changed in the global markets and future expectations over the past 4+ weeks.  Q4 2019 ended with a bang.  US/China Trade Deal, US signing the USMCA Continental Free Trade Agreement, BREXIT and now the Wuhan Virus.  On top of all of that, we’ve learned that Germany and Japan have entered a technical recession.  As Q4-2019 earnings continue to push the US stock market higher – what should traders expect going forward in 2020?

Volatility, Sector Rotation, and Continued US Stock Market Strength.

Our researchers have been pouring over our charts and predictive modeling tools to attempt to identify any signs of weakness or major price rotation.  There are early warning signs that the US Stock Market may be setting up for a moderate downside price rotation within the first 6 months of 2020, but we believe the continued Capital Shift that has been taking place over the past 24+ months will continue to drive foreign investment into the US and North American stock markets for quite a while in 2020 and 2021.

The interesting component to all of this, which should keep investor’s attention and really get them excited, is the chance that some type of foreign market disruption may take place in 2020 and 2021.  There are a number of things that could potentially disrupt foreign market expectations.

First on the list is this virus event in China (that seems to be spreading rapidly).  Second would be the news that Japan and Germany have entered a recession.  Further down the list is the very real possibility that many Asian and foreign nations could see a dramatic decrease in GDP and economic activity throughout much of 2020 and 2021.

It is far too early to make any real predictions, but traders need to be aware of the longer-term consequences of global markets entering a contraction phase related to a confluence of events that prompts central bank intervention while consumers, financial sectors and manufacturing and industrial sectors are pummeled.  Imagine what the global markets would look like if 25% to 55% of Asia, Europe, and Africa see a dramatic decrease in economic output, GDP and financial sector activities (on top of the potential for massive loan defaults).  It may spark another Credit Crisis Event – this time throughout the Emerging and Foreign markets.

A massive surge in US stock market valuation has taken place since the start of 2020.  It is very likely that foreign capital poured into the US stock market expecting continued price advancement and very strong earnings from Q4 2019.  This valuation appreciation really started to take place in early 2019 and continued throughout the past 14+ months.  We believe this valuation appreciation is foreign capital dumping into the US markets to chasing the strong US economic expectations.

We believe this surge into the US stock markets will continue until something changes future expectations.  The US Presidential election cycle would usually be enough to cause some sideways trading in the US stock market – maybe not this time.

The fact that Japan and Germany, as well as China very soon, have entered an economic recession would usually be enough to cause some sideways price rotation in the US stock market – maybe not this time.  The potential wide-spread economic contraction related to the Wuhan virus would normally be enough to cause some contraction or sideways trading in the US stock market – maybe not this time.

There is still a risk that price could revert to middle or lower price channel levels at any time in the future.  We’ve highlighted these levels on the charts below.  Yet, we have to caution traders that the foreign markets may be setting up for one of the largest capital shift events in recent history.  If any of these contagion events roil the foreign markets while the US economic activity and data continue to perform well, then we could be setting up for a massive shift away from risky foreign markets/emerging markets and watch global capital pour into Safe-Havens (metals/miners) and pour into the US stock market (US, Canada, Mexico).

We’ve authored numerous articles about how the foreign markets gorged themselves on debt after 2009 while easy money policies allowed them to borrow US dollars very cheaply.  We’ve highlighted how this debt is now hanging over these corporations, manufacturers and investors heads as a liability.  The recent REPO market activity suggests liquidity risks already exist in the global markets.  If these liquidity issues extend further, we could see a much broader market rotation within the US and foreign markets.

DOW JONES INDUSTRIAL AVERAGE – QUARTERLY CHART

Currently, the US stock market appears to be near the upper range of a defined price channel.  Near these levels, it is not uncommon to see some downside price rotation to set up a new price advance within the price channels.  This INDU chart highlights the extended price channel trend, originating from 2008, and the more recent price channel (yellow) originating from 2015.  Any breakdown of these channels could prompt a much broader downside price move.

S&P 500 – QUARTERLY CHART

This SPY chart highlights the extended upside price trend in the US stock markets.  The SPY has recently breached the upper price channel level.  It may be setting up a new faster price channel, yet we believe this rally in early Q1 2020 is more of a reaction to the very strong 2019 US economic data and the continued capital shift pouring capital into the US markets.  A correction from these levels to near $275 would not be out of the question.

TRANSPORTATION SECTOR – QUARTERLY CHART

This Transportation Index (TRAN) chart presents a very clear price channel and shows a moderate weakness recently in this sector.  The fact that the TRAN has consolidated into a middle range of the price channel while the other US stock market indexes continue to push higher suggests the valuation advance in the US stock market is mostly “capital chasing strength of the US economy” than a true economic expansion event.

2020 will likely continue to see more volatility, more price rotation, more US stock market strength and further risks of a reversion event.  We believe forward guidance for Q1 and Q2 will be revised lower as a result of these new global economic conditions originating from Asia, Europe, and Japan.

If the virus event spreads into Africa and the Middle East (think Belt-Road), then we could see a much broader correction event.  In the meantime, prepare for weaker future earnings related to the shut down of industry and consumer sectors throughout much of Asia.

If this “shut down” type of quarantining process extends throughout other areas of the world, then we need to start to expect a much broader economic contraction event.  Minor events can be absorbed by the broader markets.  Major events where global economies contract for many months or quarters can present a very dangerous event for investors.

Overall, we may see another 20 to 40+ days of “sliding higher” in the US stock market before we see any real risks become present for investors.  This means you should start preparing for any potential unknowns right now.  Plan accordingly as this event will likely result in a sudden and potentially violent change in price trend.

Join my Swing Trading ETF 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.

Stock Market Sector Rotation Should Peak Within 60+ Days – Part II

The first part of this article highlighted what we believe is the start of a broad market sector rotation setup in the US and global markets.  This second part will highlight what we believe are excellent examples of sector trade setups for our friends and followers.

As China continues to pour capital into their markets to stabilize the outflow and fall of asset prices, a number of interesting components of broader sector rotation are setting up.  First, the US stock market has rolled lower in what we are calling a “first-tier” of the “waterfall event”.

Additionally, Mid-Caps, Transportation, Energy, and Financials have all started to roll-over of already begun to rotate lower.  We believe the contraction in economic activity and global market engagement as a result of the Wuhan virus will result in a much bigger and broader downside price move than many are expecting in the coming weeks.

The death toll for the Coronavirus outbreak reached 910, surpassing the number that died in the 2003 SARS episode. This is causing huge issues with global supply chains and shipping companies as I talked about last week in my HoweStreet Interview.

We believe traders need to be aware of the continued capital shift that has been taking place over the past 4+ years.  As foreign markets struggle and the US Dollar continues to strengthen, capital has been moving into the US stock market as a protective measure.  We believe this will continue throughout the virus event, yet we believe the US stock market will contract, move lower, as a result of this virus event as well.

Many US companies are still exposed to foreign markets through overseas engagement and retail locations,  Automakers, consumer products, manufacturing, heavy equipment and dozens of other sectors derive 5% to 25%+ of their revenues from China and other overseas markets.  MacDonalds, Starbucks, Caterpillar and dozens of other US companies have broad exposure in China and Asia.  We believe this virus event could last well into July and possibly much longer.  Because of this, we believe a broader market sector rotation will take place and that volatility will continue to increase over the next 6 to 12+ months.

Here are the three sectors we believe have a strong potential for setting up a fantastic trade.  Follow our research to learn more about what we do and how we can help you find incredible trade setups.

RUSSELL 2000 (IWM) – WEEKLY CHART

The Russell 2000 (IWM) has already started to move a bit lower over the last few weeks.  Even though the US stock market was plowing higher throughout most of December and January, the Russell 2000 is actually showing signs of a rounded top formation with a very clear downside “first leg” (waterfall) type of price decline.  We believe broader market contraction and sector rotation could push IWM below $144 in an attempt to target historical support near $126.

TECS TECHNOLOGY SECTOR ETF – WEEKLY CHART

The Technology sector may see a broader market decline over the next 30 to 60 days that could push TECS from recent lows, below $6, to levels above $12 to $16 on a reactionary move in this 3x ETF.  TECS has experienced very low volatility over the past 3+ months while the US stock market has continued to rally in Q3 and Q4.  Any breakdown in the global technology sector could push TECS well above recent peak levels near $18.

XLF FINANCIAL SECTOR ETF – WEEKLY CHART

The Financial Sector is very likely to experience a 3% to 10% decrease in consumer activity related to the lack of travel, outside entertainment, shopping and food services activities and could see extended risk to loans, debts, and other services as a result of a global economic market contraction.  We believe a downside risk exists in XLF where the price will likely break below $30 and target the $25 to $26 level over the next 30 to 60+ days.  Ultimately, XLF must hold above the December 2018 lows near $22 if the current downside rotation ends within recent price ranges.  A move below $22 would indicate we have entered a new stage of a Bear trend.

The reality of the situation for most of us is that we are not at immediate risk of catching anything except a common cold or flu.  As skilled traders, we must identify an opportunity where it presents itself and we must attempt to learn to capitalize on that opportunity.  We believe these sectors, and many others, are about to present very real trading opportunities for skilled traders.

The virus is expected to double in scope every 6.5 days based on modeling data.  Obviously China and Asia are the biggest risks right now.  Our biggest concern is that the virus spreads into India and Africa.  We believe a spread into these regions could add hundreds of thousands or millions of infected people to the lists.  At this point, it is far too early to tell how extended this virus event will become – yet we feel we are just starting this rotation and the true scope of it won’t be known for many weeks or months.

Join us in our quest to create incredible profits from these bigger trends today. As a technical analyst 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 Swing Trading ETF 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.

Is The Coronavirus Bullish For Stocks?

Earnings volatility has certainly been big.  Tesla pushed the markets much higher early this week and the US stock markets have continued the upward momentum after the State Of The Union address and the acquittal of President Trump on Wednesday.  Still, we continue to believe this rally may be a “fake-out” rally with respect to the fallout from the Wuhan virus.  Certainly, foreign investors are continuing to pour capital into the US stock market as the strength of the US Dollar and the strong US economy is drawing investment from all areas of the globe.

We believe the scope of this parabolic rally in the US stock market should actually concern skilled traders.  Markets just don’t go straight up for very long.  The last time this happened was in the 1970s and 1980s.  Very minor volatility during that time prompted a big move higher in the US stock market that set up the eventual DOT COM collapse.

Oil, Shipping, Transportation, Consumer, Manufacturing, and Retail will all take a hit because of the Wuhan virus.  We’ve, personally, received notices from certain suppliers that factory closures in China will greatly delay the fulfillment of orders.  Our opinion is that nations may have to close all or a majority of their cities, ports, and activities in Asia for at least 90+ days in order to allow this virus event to peak and subside.  We don’t see any other way to contain this other than to shut down entire cities and nations.

The US Fed and Central Banks are doing everything possible to continue the economic growth and stability of global economics.  Yet, the reality may suddenly set in that without risking a global virus contagion, nations may be forced to actually shut down all non-essential activities for well over 90+ days (possibly even longer).  If you could stop and consider what it would be like for half of the world, and many of the major manufacturing and supply hubs, to shut down for more than 3 to 6 months while a deadly virus is spreading.

Repo lending continues to show that liquidity is a problem.  We believe this problem could get much worse.  Skilled traders need to be prepared for a sudden and potentially violent change in the direction of the global stock markets.

$TNX – 10 YEAR US TREASURE YIELD DAILY CHART

30 YEAR TREASURY BOND PRICE – DAILY CHART

There is now a solid wall of inversions in all the treasury notes and bills.  The 10-year yield is inverted with 6-month and shorter durations.  The 30-year long bond dipped below 2.0% for the third time and is just 6 basis points from a record low.

Prepare to capitalize on this “crowd behavior” in the near future.  Right now, the US stock market is pushing higher as Q4 earnings drive future expectations.  Yet, be prepared for the reality of the situation going forward.

This Wuhan virus may present a very real “black swan” event.  At the moment, the US stock market appears to want to rally as earnings and economic data continues to impress investors.  Overall, the real risk to the markets is a broader global economic contagion related to the Wuhan virus and the potential it may have on foreign and regional economies.

Next week is going to be critical for many things I feel. Virus contagion growth, factory closures, Oil breakdown follow through, equities breakout follow through, and the precious metals pending move.

We locked more gains this week with one of our positions as we rebalance our portfolio holdings for these new big trends to emerge. If you want to know where the markets are moving each day and follow my trades then join my ETF Trading Newsletter.

Chris Vermeulen
www.TheTechnicalTraders.com

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.