Are markets bottoming? Important COV19 24th March 2020 update

The Dow rallied more 2000 points on Tuesday 24th March 2020.

But IS THIS THE MARKET BOTTOM?

First, if you have been following us on this blog, you will know that I have centered our recent market discussions around COV19, since the virus first surfaced out from Wuhan China back in January 2020. This was because I understood early, the implications and the potential impact the epidemic would have on the markets, as early as January, when we were trading at all time highs - against multi year resistance nodes.

I was also short the markets, largely most of the way down to recent levels, predicting on March 8th 2020 that we were entering into a Pandemic, that things were going to get worst - and governments worldwide were likely all going to close of their economies, modelling after what China and S.Korea did.

You can check out some of our earlier posts...

It was a result of simple math and extrapolation of data, to see that cases worldwide will dwarf cases within China.

Today we are seeing countries implementing social distancing measures, closing their economies to varying degrees, to "flatten the curve", to prevent their healthcare systems from getting over-runned - To buy time, to better prepare their healthcare system to handle the more critical cases who need ventilators and ICUs.

This is because if the healthcare system gets over-runned, than the mortality rate would go up significantly ( from 1% to 10% as seen in Italy ), which could otherwise be avoided.

Big picture view of COV19 situation globally :

Lets start from the top of the list.

China - no longer seeing local infections - largely imported cases - which provides further evidence that strict testing/contact tracing/quarantine/containment measures work, as was the case in S.Korea, Singapore, and many Asian countries.

Europe and US largely gave up on containment - and adopted a delay strategy, to help their health care systems to better handle the pandemic.

To give some perspective :

Thailand  - closed all malls, bars, nightlife, shops, schools ( only super markets allowed to operate ) until April 12th - mandated curfew where nobody is allowed to be out of their homes from 7pm - 7am. The penalty is 2 years jail time.

Malaysia - Country wide lock down till 31st March 2020.

India ordered lockdown of country for 21 days.

Governments in Asia have adopted a more draconian approach to containing the spread. ( Containment Strategy )

Most of Europe have partially closed their economies and putting into place, social distancing. ( Delay Strategy )

We can expect the numbers in Europe to continue increasing for a while, but for the short term, markets have already priced in that fact and will likely not react too negatively to these increases.

This can be evidenced by what happened over the past few days for cases in the USA.

On Sunday 22 March 2020 - New york reported 15k new cases, becoming the new epic centre for the Corona virus.

Nevertheless, markets found support on monday, and Tuesday saw the DJIA rally more than 2000 points...

Let us look at the charts to explain why.

The market collapse started not long after we hit multi year resistance nodes.

We had a few tradable intraday rallies off 20744.90.

We are now seeing a 2000 point single day rally on the DJIA, off 18491.12, because we hit Yearly F3 support node, a level that our DiNapoli techniques identified weeks in advance

This has given me the confidence to build up a position in Tesla a few days ago at 371, knowing where we were trading on the broader markets.

You can see all our analysis below ( some of the daily posts we sent out to Weekly Focus members )

Weekly focus post on 19th March 2020 

Weekly Focus Post on 20th March 2020

Weekly Focus Post on 24th March 2020

The bottoming process on US markets - have already began - earlier today.

And this was the Entry - Intraday on the 30min Chart!

Markets have since rallied hard into the close!

So where do we trade from here?

I wont say that the worst is over - but what I am going to say, is that in the short term, we should likely see the rally continue off these levels, this week.

Below are my targets :

DJIA

I expect us to to hit 21609 on the DJIA.

We most likely would hit 22551.

Depending on how the COV19 situation evolves - best case profit target at 25230. ( in the less likely situation where maybe an effective treatment for COV19 is developed )

 The equivalent numbers on E-mini S&P futures ( where most traders trade )

Targeting a move all the way to 2641.50, where I will likely liquidate long positions, and possibly turn short.

Below are developments that will factor into my thinking :

1) How successful are recent containment measures by various governments worldwide in 'flattening the curve'? 

2) COV19 situation in USA, particularly New York, how well their healthcare system hold up.

3) Results for Chloroquine Trials. 

This could be a market wildcard that could totally shift market sentiment.

Political alignments aside, the early data on Chloroquine - are promising.

Check them out. ( some positivism amidst all the doom and gloom )

 New Treatment

Case study 

If we get a viable treatment going - people will start getting back to work - Trump will likely reopen the US economy - and the markets could possibly rally hard.

The truth is :

There are just so many variables that it is simply impossible to predict what the market is going to do. But you do not need to know that, or to be right, to make money trading the markets!

We rely on our ability to read the markets using our tools... which was what got me short the market weeks ago - what got me long TESLA last week, and what got me long the ES today! Reading price action around our pre-calculated levels, and executing our strategies. 

At each moment - we do not know what the market is going to eventually do.

The only thing we have control over - is planning our trades based on the information we have to the best we can, and executing them.

We rely on our trading plans.

So to end this blog post -  Is this the market bottom?

Here is the Truth :

I dont know. And we dont need to.

All I know is that the markets is most likely going to continue rallying higher this week, and for now, we want to be on the long side ( and I am! ), given the current sentiment and the impending Congress announcement for the Stimulus Bill.

We will also be doing a webinar soon, where I will discuss the current markets in more depth  than I have done in this article. Click subscribe to get those updates!

I will also be sharing how you might better make use of these market insights and the Learning Path we offer.

Keep posted and watch your inbox!

For the Day Traders out there :

Best of Trading this week,

Joseph AuXano

P.S. for what is worth - here is my 'prediction' ( based on current information, my best guess which I will change at anytime when new information becomes available )

 ES chart

2 important numbers to watch :

2641.50 resistance.

2354 support.

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