EB Daily Market Report - Thursday, April 9, 2020
This is going to be a very brief update as I'm having serious internet difficulties today and I've been told by my ISP that it will continue throughout the remainder of the day. It went out during my recording of Trading Places LIVE for StockCharts TV and just came back on - although it's likely to be just temporary. Unfortunately, I don't have the Starbucks back up option either given the current crisis. So I'm squeezing in this update while I can get it to you.
If you're in the mindset of shorting, NOW is the time. If it doesn't work here, I'd be very, very concerned from a shorting perspective. Here are the reasons to consider shorting:
(1) Next Friday is options expiration. It's too early to be thinking about trading solely on this strategy, but all the calls bought the past 1-2 weeks are now deep in the money, so a sudden reversal at any time would not surprise me. This becomes an even bigger concern if the market continues powering forward next week.
(2) We're now at the Fibonacci 50% level:
(3) Note the pink lines added to the above chart. That shows a negative divergence on the 60 minute chart, suggesting slowing momentum to the upside as well.
(4) The equity only put call ratio ($CPCE) now shows its 5 day SMA at .73, well below the record 1.05 level. It's not exactly at a complacent level, which to me would be in the .50s, but it's not overly pessimistic any longer. That clears the path to the downside a bit, in my opinion. In the following chart, readings in or above the green-shaded are would be bullish for equities (contrarian indication), while the red-shaded area and below would be bearish for equities:
(5) The daily RSI has crept up to 55 and 54 on the S&P 500 and NASDAQ, respectively. The bearish argument depends on RSI 50-60 holding as key resistance.
Let me be clear about one thing. I am bullish. I believe we remain in a secular bull market. Do not misinterpret anything here to suggest that I'm bearish U.S. equities, because I am not. However, IF I were to consider shorting with an inverse ETF (SDS to short S&P 500 or QID to short NASDAQ 100), I believe we've reached a solid reward to risk level to do so.
Tomorrow, we'll have our next WebinAR (WAR) Room event, starting at 10am EST. We'll make sure you get instructions to attend and we'll also record the event for those unable to attend LIVE. Let's just hope my internet is available. I've been told this is a one day issue only.
Happy trading!
Tom