This is 9/11/2020. It was 19 years ago that those September 11 attacks happened and Saudi Arabia princes are still laughing about it, although some of the ones most closely connected have passed away. I guess in 2020 we got so many other things to worry about and right now all stock market bulls care about is whether the market can rally now, because it has been an ugly couple of days. The S&P 500 and DOW have dipped, but stocks like TSLA have really gotten smashed hard.
Right now the S&P 500 has fallen enough that it is sitting on support. Take a look at the chart.
The S&P 500 has come down to its 50-day moving average. That’s the blue line on the chart that typically acts as support during strong rallies as you can see in the up arrows I have drawn on the chart. The S&P 500 is also oversold in terms of daily stochastics so it SHOULD hold support here and rally and we got a Federal Reserve meeting next week for bulls to buy into.
However, if the market does bounce and then break this support level then it will be a confirmation that the big rally momentum that began in March is OVER. That does not mean the market will crash like it did in March, but that the trend is no longer up, but sideways or down. It means it’s time to be cautious. That’s not a message people like hearing, but it makes actually for a good time to get out of bad stocks and into the stocks that don’t fall as much as the market does when it drops and are poised to go up more now going forward.
In other words what the action of the past week is telling us is that it might be time to make some changes. It says yes reduce risks, but maybe take some profits and maybe get out of some losing positions so we can have some cash on hand to buy some new stocks in a few weeks. I talked about this and other thoughts a few days ago with Jim Goddard of www.howestreet.com. In case you missed that interview you can listen to it here.
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-Mike
