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Bleeding Of Markets - What is Next?
We think speculators deserve a quiet weekend after the massive sell-off that we saw in February, but the market has a completely different opinion on this. It started on Monday with huge downward gaps in the major exchanges and yes, the Corona virus is still responsible for this but we have a new player in the game - Oil.
As if the Corona virus was not enough to cause all of this decline, Saudi Arabia had started a price war in the oil market. They lowered oil prices and announced an increase in production, which led to a significant increase in global supply. If we combine that with the stalled demand from China, then we have an explosive mixture, which in fact just exploded causing the oil price to drop to new long-term lows.
Low oil prices are usually is good for stocks, but this time is different. As what is happening now is just additional pressure that is useless to the markets, which increases the decline in liquidity, as well as random movements. At the start of the European session, the DAX is approaching the neckline of the giant double tops pattern over the monthly interval (around 10334 points). Technically, this breakthrough, if it occurs, could open the way to its lowest level since 2007, at 6,900 points when the major financial crisis began.
The S&P 500 does not look better, as the price is targeting the last long-term bullish trend line. In 2007-08 the index fell about 900 points. The current decline of the index is close to 600. Thus we still have about 300 bearish points awaited to reach the long term bullish trend line (approximately around 2600 level). It makes sense, for history always repeats itself, right? In my opinion, reaching the bullish trend line is an acceptable technical move. Once we reach this uptrend line, traders will likely not panic and instead, they will start to think positive again. Let's not forget that the overall improvement is closely related to what is happening on the ground! The charts are not only a reflection of what is happening globally .. We hope that things will improve
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