This week we have continued to see much of the same issues we have been dealing with over the last few months. The market itself has become a bit less deliberate over the last few weeks. Generally, a deliberate market is one where the price is consistently moving and void of choppy and volatile price action. While perfect price action is not needed, a consistent and patterned movement is what is desired.
The big issue in the market right now continues to be the spread of the coronavirus and how that is going to affect the markets. This may take longer to play out as the spread continues to grow and seems to be holding on longer than what was initially expected. The market seems to be looking for a possible vaccine that would allow more control over the spread which would possibly lead to an improvement in the employment numbers. Of all the reports currently coming out, those dealing with employment and unemployment are the ones that are moving the market the most.
Going along with this is the talk about another stimulus package that congress, and the senate are working on. While we do not know when this will happen, the fact that they are discussing it will cause the market to respond in a positive manner.
Another issue right now is the tensions between the US and China surrounding the trade agreement. Both sides have closed locations in their respective countries to try and prove the point of not cooperating with each other. We will need to wait and see what happens before we can know the possible impact that this may have, especially over the long term.
Today we are going to look at the daily charts of the DJ-30 and SP-500.
In the daily chart of the DJ-30, you can see the sideways pattern that has been happening since the highs back in June. In fact, this pattern is developing into a triangle or wedge formation where the highs are moving lower and the lows are moving higher. This movement is a consolidation pattern where the buyers and sellers are having a hard time trying to take control of the direction to push price. This pattern can continue for some time so we will be looking for the time where price breaks out of the range and begins to move higher or lower. Either way, there will be an opportunity to take a trade as the momentum pushes prices up or down.
As we look at the daily chart of the SP-500, notice the difference in the price action that is happening. The highs are moving higher and the lows are moving higher also. This is a pattern of a bullish trend and one where we would be more inclined to look for bullish trades. Generally, you will see the various markets following each other but occasionally, you will see a bit of a non-correlated move like we see between these two charts.
The key for the markets right now is to focus on trading what we see happening and not what we think is going to happen. Take some time to consider the price action and patterns that you are seeing on the chart when you are looking to place trades.
About Profits Run:
Profits Run Inc. was founded in 2001, by Bill Poulos and his son, Greg Poulos. The company’s mission is to provide their customers with the knowledge to make smarter investments with minimal risks. Headquartered in Wixom, Michigan, Profits Run has assisted over 100,000 people in 150 countries around the world with their wealth management. For more information on Profits Run follow Bill Poulos here, on Medium.