Equities:

Nasdaq – down 330.65 points or 3.02%

The Nasdaq Index represents the tech sector and includes the world’s foremost technology and biotech giants such as Apple, Google, Microsoft, Oracle, Amazon, and Intel. No surprise to subscribers, this index has blown the doors off all other indexes as these stocks have been the market leaders all the way up. But now that we are seeing the markets turn, it is these same high powered stocks that are being hit the hardest. The Nasdaq has now dropped below its 50-Day Moving Average (purple line on chart).  Note: In early September entered a short position on the Nasdaq with an easy to trade Exchange Traded Fund (ETF)

Russell 2000 – down 2.98%

The Russell 2000 represents American small cap stocks and the broader stock market and economy. We note that the small cap stocks did not come close to exceeding its February all-time high and has been struggling since early August to make any gains. Note that the Russell 2000 has dropped below its 50-DMA (purple line) and is now right on its 200-DMA (blue line), and a break and close below that level suggests a deeper correction.

S&P 500 – down 78.55 point or 2.37%

The S&P 500 represents  more retail  domestic investors, which drove up the S&P 500 to new highs in early September, but is now back below its February high. The S&P 500 is also now below its 50-DMA. Note: In early September  entered a short position on the S&P 500  with an easy to trade Exchange Traded Fund (ETF)

Dow Industrials – down 525.05 point or 1.92%

The Dow Jones Industrials reflects big institutional and international capital, and it did not make a new high after the March crash.  Given that it did not rally as strong as the other indexes we expect it will not decline as deeply as the Nasdaq, Russell 2000 or S&P 500.  The Dow has now dropped below its 50-DMA and is approaching key support at the 200-DMA which is 26,287.

Canadian TSX – down 325.78 or 2.02%

The TSX represents most of Canada’s largest companies including many in the mining and banking sectors. The TSX was also not able not make a new high since the February high. The TSX has also dropped below its 50-DMA and is now testing support its 200-DMA (blue line).

Precious Metals:

Gold – down 39.20 or 2.05%

Gold closed today at 1868, just slightly above the August 12/20 intra-day low at 1865.  If we see gold break below and close below 1865 we could see a re-test of 1800.

Silver – down 1.42 or 5.78%

Silver is the more volatile of the precious metals, generally moving higher than gold in bull markets, but also moving lower than gold in bear markets or market corrections. That is what is happening right now; while gold declined 2.05% today, silver dropped over double that rate at 5.78%.

Currencies:

US dollar – up .43 or .45%

Despite all the doom and gloom projections for the $US, when investors get nervous and want some safety for their capital, the $US is still the ‘safe-haven’ currency.

Euro – down .005 or .45%

Note: In late August we entered a short position on the Euro with an easy to trade Exchange Traded Fund (ETF)

Canadian dollar -.005 or .61%

If you are not a subscriber but would like to be, we are offering some great discounted rates for our three services.

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Dealing with COVID-19: An open letter to Canada’s prime minister and provincial and territorial premiers

In yesterday’s update we discussed how the US Federal Reserve pledged to maintain at least the current pace of asset purchases and projected interest rates will remain near zero through 2022.  We also showed how most indexes were overbought based on the RSI. Overnight the market had a chance to digest that commitment from the Fed and decided that if the Fed is not even considering raising rates for another two years, then they must be seeing plenty of trouble in the next year or two.

One of the things we have been warning subscribers about is the incredible debt crisis that is looming, not just in governments, but also companies. Low interest rates have created zombie companies.   One side effect of central banks keeping rates low for a long time is that it interferes with the normal process of poorly run companies failing and disappearing, it is a natural attrition. With central banks like the Fed actually buying up debt of these companies it is keeping many unproductive companies alive, which ultimately lowers long-run growth rate of the economy.

This chart shows the percent of US firms that have debt servicing costs that are HIGHER than their profits.

The markets sold off today in a dramatic fashion.

The small cap stocks were the big losers today again as identified by the Russell 2000 Index. It dropped a whopping 7.63%, the worst day since March 16.

The Dow Industrials continued to lead the way down for the big three US indexes, down  6.90%. The Dow has now fallen out of its uptrend channel, and by closing below 26,000 warns that the Dow may be leading the markets back into a correction, so caution is required here.

The S&P 500 also falls out of uptrend channel, as it was down 5.89%

The Nasdaq which has been the market leader, also hit, down 5.27%

The Canadian market was down, but at 4.14%, less than the US markets

Yesterday we noted the $US was oversold, at least in the short-term, and it got a bounce today as the safe-haven currency.

Gold caught a bit, as low interest rates makes gold more attractive.

If you do not have a plan to protect yourself in the case of another destructive market decline, then you should seriously consider subscribing to Trend Technical Trader which has a series of defensive plays for you to implement. These plays can not just protect you from losses in a deep decline, but they can help your make significant gains. To subscribe at a very special rate of $399.95, a savings of $250 CLICK HERE

Stay tuned!

In a recent blog we discussed the importance of having a hedging strategy.  It’s a way to protect your portfolio, and protection is often just as important as appreciation.

Since February 21^st, we have seen a significant stock market crash, with the S&P 500  dropping 35% from the high, blindsiding most investors.

Fortunately for subscribers to our Trend Technical Trader (TTT) service, they were presented with several effective hedging strategies that were simple to follow and easy to implement.  The results allowed subscribers to not only protect their capital in this bear market, but to actually make some significant gains.

Some examples:

An Exchange Traded Fund (ETF) that trades on volatility: +29.5% in 3 days

A 2^nd position in that same ETF: +48.5% in 1 month

A leveraged Bear Small Cap ETF: +47.2% in 1 month

A leveraged Short DJIA ETF: + 61.5% in 2.5 weeks

A leveraged Bear Jr Miner Gold ETF:  +86.5% in less than a week

The question now is, ‘what next?’ As we can see from this chart, after the significant decline, the S&P 500 is in a near-term uptrend channel. Is this the start of a new bull market, or a dead-cat bounce?

The headlines are full of talking heads predicting everything from ‘back up the truck’, to ‘it’s a bear trap.’  If we look at other major bear markets one thing is clear, they all end eventually. But typically they only end after it is no longer the lead story in the mainstream media.

Typically markets only bottom out once people have moved on, not when investors are buying every dip.  If you followed a hedging strategy during the big crash, and are now in a strong cash position, you need to have a strategy for when to get back in, just like you needed to have a strategy for the decline.

After the big crash we saw a lot of ‘bottom picking,’ buying, which suggests that there is still too much optimism in the markets.  There is a real FOMO (Fear of Missing Out) sentiment in the markets, which suggests that a re-test of the low, or even lower lows, could be in the cards.

These are crazy times.  We have a global pandemic, with fear and panic running rampant.  We have central banks and governments turning on the fire hoses, pumping out $trillions into monetary and fiscal stimulus programs.

While we can’t know exactly how things will play out, we will follow our models to get a better idea of when to get back in.  Our TTT service has been actively making very short-term, and even a few long-term trades already, positioning for when we get the full green light to buy back in.

Here is Monday’s commentary from TTT:

DJIA started the week with a gain of 690 points.

While earlier this year that would’ve made for a truly remarkable day, instead it was the calmest trading day in many weeks.

It’s likely this current rally is very near its end, and we expect many more stellar entry levels during the next major leg downward.

When stocks drop significantly again, we’ll suggest lowball bids for additional positions, focusing on the resource sector and specifically oil.

The overwhelming bearish sentiment and predictions on oil at present has us ready and eager to buy.  We made absolute killings in oil-related stocks the last time prices crashed and the world turned ultra-bearish.  We expect this time won’t be different, and once again we’ll be focusing on a variety of companies and related funds, some paying considerable yields.

In contrast beware of the extreme hype currently with respect to gold and silver.  Such extreme sentiment along with stories of shortage and conspiracies about price suppression tend to attend a top.  We’ll load up on quality mining stocks and speculations related to precious metals if there’s another major liquidation soon.

If interested in subscribing to TTT at a special rate of $399.95, click here.

Stay tuned!

Wall Street suffered its biggest drop since 1987 on Monday, with the S&P 500 closing at its lowest level since December 2018, as investors fear the coronavirus pandemic is proving a tougher opponent than central banks, lawmakers or the White House are currently capable of battling.

US – S&P 500

The S&P 500 dropped another 324.89 points, the biggest single day drop since 1987.

Canada – TSX

The Canadina market dropped ~10% today, and is now done 31% from the February high.

Germany – DAX

The German DAX Index is now down over 38% since February. Note a the bottom of the chart, the Relative Strength Index is at 10.47, an incredibly low reading. telling us this market is extremely oversold.

US Dollar

Global capital has been flowing into the $US, seeking a safe-haven.

Canadian Dollar

Canadian dollar drops to its lowest level in over 4 years. Being a commodity based currency, the fears of a global recession have hit commodity prices hard.

Euro

The Euro caught a bit of a bid today after falling off its recent high.

Japanese Yen

Very similar story for the Yen.

Gold

Gold has not played the role of a safe-haven because when hedge funds started to lose money in the equities they have been forced to sell EVERYTHING to cover losses and margin calls. Gold is starting to get oversold here.

Oil

The price of oil continues to fall as the coronavirus lockdown continues, pushing the global economy ever closer to a recession.

Stay tuned!