Wednesday, December 4, 2019

Assessing the technical damage

Mid-week market update: The stock market weakened on Monday when Trump's early morning tweet indicated that he was slapping on steel and aluminum tariffs on Argentina and Brazil. The sell-off continued into Tuesday when Trump said in a news conference that he was in no hurry to do a trade deal with China, and he was willing to wait until after the 2020 election.

The market was already vulnerable to a tumble two weeks ago when it violated a rising trend line. This was followed by a rally to kiss the daily upper Bollinger Band, but it could not rally above the breached trend line.

The SPX gapped down on Tuesday, but formed what appeared to be a reversal candle, which was accompanied by a mild oversold reading on the 5-day RSI. The reversal was confirmed when this morning when equity future began to bounce back in sympathy with European stocks. The rally was further boosted by a Bloomberg report that "the U.S. and China are moving closer to agreeing on the amount of tariffs that would be rolled back in a phase-one trade deal despite tensions over Hong Kong and Xinjiang".

How serious was the sell-off? What's the technical damage?

The full post can be found here.

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