Fed surprise rate cut - Markets tanked 785 points

So for those of you that have been following this blog, and following the markets,

you know of the market volatility we have seen in recent weeks.

One way to look at it was the corona virus.

But just 2 weeks ago - the markets was making new market highs!

Since December, I have highlighted the importance of these Multi Year Resistance nodes.

DJIA Yearly chart

It took some time to play out - we had the expected market volatility, we had iran missile strikes, Trade Wars, but finally, it was the Corona Virus that triggered the recent market sell off.

But crucially to understand the magnitude of these moves, you have to understand 2 things.

1) The Significance of Multi Year resistance nodes. 

2) Understanding of market mechanics and how markets work

We wont be covering them here. 

Joe DiNapoli and I did a webinar together to highlight the above.

You will want to check it out!

I will also be doing some lessons based on the trading that took place during the entire COV19 situation. They will be made available to DAP owners soon ( DiNapoli Academy Program owners )

But here is a high level break down from the higher timeframes to the lower timeframes.

DJIA Quarterly

Support at Q K led to a 1000 point single day bounce.

Monthly MACDP sell ( Reaching A )

DJIA Weekly Chart

This was the MYSTERY SELL that BECKY QUICK and JOE DINAPOLI mentioned

( in the webinar ), that triggered the 4000 point single week selloff.

So where are we trading now?

ES Daily

We all know the importance of the 200day moving average. ( brown line )

We  retested it earlier today, against F3 resistance node.

ES 30min

Fed did the surprise rate cut to try to jolt the market.

IT succeeded to a certain extent.

5minute chart

Just moments before the announcement, we traded below the 200MA, took out intraday stops ( red highlight ). On a break back above 200MA ( brown line ), 

the surprise FED cut hit the news wire.

The way it happened and the timing of it, was really strategic in my opinion.

Intraday traders will come in to buy up this market.

The fact that this calibrated move by the fed could not take the markets higher, with the DJIA closing 785points lower, is significant.

I will be doing detailed break downs on how and when I entered this market on the short side, including the cues that prompted me to do so ( in the lessons ),

but here is the bottom line.

Despite the surprise FED rate cut, we still ended the day down 785 points, and crucilally, back below the 200 day moving average. This gives me an important bias based on the information available to me now.

As long as we stay below this 200MA, and especially if we see price continuation to the downside - expect the market selloff to continue and by inference, the COV19 situation to worsen.

On the other hand, summer is fast approaching, with it the HEAT, which could help containment and quarantine efforts. 

We need to stay below 200MA for us to trade lower.

If we trade lower, expect significant support at these higher timeframe nodes.

My opinion is that we will have will have that much needed market retracement after this relentless 10 year economic expansion that we had.

One way or another COV19 like SARS will be resolved.

This will get us down to important support nodes ( below ), where I expect markets to find support. 

 We are still seeing cases in S.Korea, Italy, Iran doubling. ( 500 to 1k to 2k to 5k )

 I think COV19 situation will drag on, as such, further downside.

Price trading below 200MA supports my view.

Best of Trading,

Stay safe

Joseph AuXano

Webinar Link