Has the Equities Waterfall Event Started Or A Buying Opportunity?
Commodity Online | February 25 2020
UPDATED 09:40:16 IST

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Over the past 5+ days, a very clear change in market direction has taken place in the US and global markets. Prior to this, the US markets were reacting to Q4 earnings data and minimizing the potential global pandemic of the Coronavirus. The continued “rally to the peak” process was taking place and was very impressive from a purely euphoric trader standpoint. Our researchers found it amazing that the markets continued to rally many weeks after the news of economic contraction and quarantines set-up in China/Asia.


We believe a number of critical factors may have pushed global investors away from their comfortable, happy, bullish attitude over the past 5+ days – most importantly the reality that the virus pandemic was very real and would continue to result in a more severe global economic contraction process and the outcome of the Caucus voting where Bernie Sanders appears to be leading almost every early voting event. There are now two major concerns hanging over the global markets and the future of the US 2020 Presidential elections. These two major issues may be enough to change investor sentiment and present a very real volatility event.


Our researchers believe the underlying concerns that are becoming more evident to global traders are the very real facts that the global economy may continue to contract because of the spreading Corona Virus and risks of a global pandemic event and the fact that the US 2020 Presidential election process appears to be setting up to become a real battle between Donald Trump and Bernie Sanders. Our re-searchers believe the combination of these two unknowns is creating an environment where global trad-ers are fearful of the future growth opportunities within the US and global markets.


Bernie Sanders has been dominating the Caucus events in the US as a Socialist/Progressive candi-date. For many Americans, this is a frightening concept. Even early into the Caucus voting cycle, it appears Mr. Sanders has taken a very clear leadership role headed into the 2020 Presidential election event. Business and global investors are not going to like the concept of a Socialist/Progressive US Presidential candidate. This is going to cause investors and business owners to avoid engaging in pro-jects and opportunities until after the November 2020 elections.


Add into this fear contagion the fact that the Coronavirus event may continue to add to the global fear component of the US and global economy. How much more risk is involved because of the spread of this virus over the next 12+ months and how will this concern complicate the concerns related to the US Presidential electing event?


Daily Dow Jones Industrial Chart


This Daily Dow Jones Industrial chart highlights the huge Gap lower that took place early on Monday, February 24, 2020. This huge move resulted from an extended fear of a growing potential for a global pandemic event and a renewed fear that global economic activity may be greatly reduced over the next 12+ months. We believe the extended fear of a potential Socialist/Progressive Democrat candidate may be adding to this massive decline in the global markets.


Transportation Index Daily Chart


The Transportation Index is an excellent measure of future economic activity expectations and investors belief that the global economy will recover from this potential contagion event. On Monday, February 24, 2020, the Transportation Index collapsed below 10,600 on a Gap Down move as the markets col-lapsed. This is a real sign that global investors suddenly believe the global markets will contract over the next 3 to 6+ months and are moving away from risky instruments in the US and global markets.



Weekly Transportation Index


This Weekly Transportation index chart illustrates just how far the TRAN could move while still saying within the range of price activity from 2018 to 2019. The TRAN could fall all the way to levels near 8,800 before reaching the lows of December 2018. Thus, from current levels near 10,500, we could see a continued price decline in the global markets of at least 15% to 20% before we near the 2018 lows.

 

As our research team has been predicting, it appears a Waterfall event is beginning to take place. This Gapping downside move may become the catalyst top in the global markets that presents a broader market rotation/decline. As we've been warning, be prepared for broad sector market rotation and for precious metals to skyrocket as greater fear sets up in the global markets. We hope you were paying attention to our research over the past 5+ months. We've been all over this setup and have issued mul-tiple warnings for all our friends and followers.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I be-lieve 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.


Chris Vermeulen
www.TheTechnicalTraders.com

 



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