That’s the sound of government stimulus.
Turns out the market is hungry. And by ‘the market’, I mean the US Federal Reserve.
Last week the Fed said they will offer unlimited liquidity.
The market didn’t react to that at the time…
But now, the Fed is doing something drastic. Barron’s reported that the Fed will buy bond exchange traded funds (ETFs).
Take a look at what Barrons said…
Under the ‘Secondary Market Corporate Credit Facility, the Fed can buy up to 20% of the assets of any exchange-traded fund that provides broad exposure to the investment-grade bond market.’
Turns out the market loved the idea of this. The Dow Jones flew 11.37% higher.
That’s the biggest daily rally since 1933!
Oh, and Trump wants to kick start the economy again, as soon as Easter Sunday!
That’s what’s happened. Now you may be wondering…should you be buying the market today?
Let’s take a look!
Yesterday there was over 378,000 confirmed cases of COVID-19.
The Chinese Wuhan virus has also killed around 16,500 people.
Today, there’s over 421,000 confirmed cases. And 297,000 are still active cases.
Australia has over 2,000 cases now.
Again, as the world balloons higher with confirmed cases…China still has around 81,000 cases and cases have plateaued since 4 March.
I don’t believe this.
International Business Times ran a story on this recently…
IBT said ‘[o]n March 19, China’s Ministry of Industry and Information Technology (MIIT) announced the numbers of cell phone users in every province in February. When these numbers are compared to the December 2019 data, it revealed that both cell phone users and landline users dropped dramatically.’
And that ‘[t]he comparison showed that the number of cell phone users decreased from 1.600957 billion to 1.579927 billion, while landline users dropped from 190.83 million to 189.99 million.’
To put that into context, there are now 21 million less mobile users and 840,000 less fixed line users in China.
Why? I’m not sure, but it makes you wonder, huh!
Anyway, that’s where we are today…
Now let’s take a look at the Dow Jones [DJI] below.
The Dow Jones [DJI] – Resistance Is Overhead!
Source: Trading View
What you’re looking at is the weekly chart of the Dow Jones [DJI].
It has three lines on it, I’ll explain them shortly.
Over the last month, the Dow Jones has fallen 38.5%. It erased all the gains since Trump became president.
The three levels are Fibonacci levels. It measures the difference between the mark high and the February low. Then I’ve divided it into three parts.
The reason for this is that these levels may provide us with ‘high probability’ resistance levels.
Meaning there’s a high chance that the market may reverse direction and go down…or temporarily holt before going higher through it.
The first level is at 22,544. This is the 38.2% Fibonacci level.
The second level is at 23,885. This is not necessarily a Fibonacci level…but is 50% between the top and the bottom of the move. It’s important to watch.
The third level is at 25,226. This is the 61.8% Fibonacci level.
If this market is moving higher, it will move through all three of these levels.
Right now, I cannot see that happening, and I would err to the side of caution.
I don’t think the damage to the economy has been fully priced in yet. And what we may be seeing is just a rally into late April, or May before another pull back.
This is something to keep in mind.
If the market is moving higher over the medium term, it will give us plenty of signals. If you’re a chartist like me, you can see this play out on the charts…like a higher weekly low, for example.
Either way, I’ll be here to commentate on the markets for you.
But for now, cash may still be the best play to be in.
As always, this is not a recommendation to buy or sell the market. It is an update only. I hope you found it useful.
From my living room,
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