The US stock market has rallied substantially since the bottom on March 23, 2020. Our Adaptive Fibonacci Price Modeling system is showing us just how fragile the US stock market and certain sectors of the markets really are right now. What’s going to happen next and how should you prepare for the next big move? Let us try to explain our beliefs.
First, the US stock market bottom just as the US Senate and Fed announced major stimulus packages designed to support the collapsing markets. Everything done prior to the March 23 date was “fodder” as the risk to the global markets was far greater than anything the US Fed or global central banks could muster. On March 23, the US Fed initiated an unlimited asset purchase program to support the failing markets. This changed the perspective of traders/investors immediately – but it also created a massive risk factor that few even considered.
Our own research team was calling for a breakdown in the US and global markets many months in advance of this move, even before the world knew about the Chinese/Wuhan virus event.
January 29, 2020: Are We Setting Up For A Waterfall Selloff?
February 18, 2020: Is The Technology Sector Setting Up For A Crash? Part II
Less than 3 days prior to the massive selloff event, we posted this:
February 24, 2020: Has The Equities Waterfall Event Started Or A Buying Opportunity?
Today, we are posting this article to highlight the unique setup in many of the major US stock indexes and sectors. Using our Adaptive Fibonacci Price Modeling system, two things become clearly evident in the charts…
Price must hold above support levels in order for the uptrend to continue.
Price has already reached (in most cases) the Fibonacci projected target level. This level may turn into major resistance, pushing the price back into a downtrend.
DAILY SPDR S&P 500 ETF CHART
This first daily SPDR (NYSE:SPY) chart clearly highlights the setup we are describing. First, take a look at the cyan line on the chart near the 282.97 level. This Fibonacci target level becomes support when the price moves above it and becomes resistant when price moves below it. Currently, the SPY is trading very near to the 283 level and we believe this level may turn into massive resistance over the next 5 to 10+ days.
Daily SPY Chart
Source
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