Earlier today, expectations began to build around the likelihood that China would soon increase economic stimulus measures. Asian markets together with futures contract, including the rose.
Can we rely on headline-driven optimism to act as a catalyst for a jump in stocks? Not necessary.
Note that the alternation between gains and losses every day since last Wednesday's highest record for the benchmark. Taking this into consideration, it would indicate that positive headlines do not necessarily cause anything more than fleeting exuberance – which has not helped the market to find a direction.
Perhaps the technical map can provide some clarity.
S&P 500 futures fell yesterday, below the most recent upward trend, since the low of January 31.
At the same time, both the MACD and the RSI caused negative differences, showing that the peaks from January to February were not supported by a wide price range, nor by momentum. These are bearish indicators.
When this happens along with the price falling below the upward line, investors should pay attention, at least until there is more insight into the impact of the corona virus and its effect on the chart.
Trading Strategies
Conservative traders would wait until the price reached a new high, followed by a re-test of the upward line, to continue following the trend.
Moderate traders can wait for a new high followed by a new corrective movement for better access, not necessarily for trend veracity. Alternatively, they would fall short if the price fell below 3,350 and did not rise above that level.
Aggressive traders can fail as they please, provided they understand the risks and have drawn up a suitable trading plan that they would adhere to.
