A strong recovery off the 23 March low with a Buy Signal on 24 March at 2368 initiating a new T structure into a series of highs in the 2630s before dropping back towards 2450.
Another very strong continuation move higher in the shortened week opening well above the Buy Signal line on 06 April sees the market above 2800 before dropping back a little prior to the holiday weekend.
The market shrugs off the worst of the news and discounts the economic impact of a shocked global catastrophy, preferring to expect considerable support moving forward.
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The rapid drop in price bottomed on 23 March but as we can see in the chart below with the T volume oscillator*, the market was already showing some signs of recovery - bullish divergences between price and oscillator - after the 12 March decline.
In effect the market was waiting for just a little good news, a catalyst for some kind of recovery.
The rapid move higher in the oscillator - up through the cash build up line** in the oscillator - confirms the liquidity and buying power associated with a new T structure emerging, and it continues at a high level suggesting further strength ahead.
This T structure projected recent highs on 26 and 30 March, and 02, 06, 08 April, with the next high projected for 13 April and perhaps further strength into 23 April.
** The T volume oscillator is an indication of Buying Power within the market as a whole
** The cash build-up line is a declining line drawn above a series of lower highs made in the oscillator.
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Zooming out to the weekly chart, we can see that the recovery towards 2800 places the market back above the trendline from the 2016 low.
The collapse currently looks like a larger version of the February 2018 collapse with an ongoing 50% retracement.
The structure from high to low is currently small with a possible high projected for the end of April.
As we can see from the earlier collapses from all time highs we should expect a period of stabilization after the initial bounce, absorbing the volatility and impact of the decline prior to a meaningful recovery, or continuation of the decline.
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The monthly chart shows progress back above the support of the black line, showing how fundamentally important the 2500 level is.
Key levels above are the red line at 2867 and the green line at 2984
Penetration of the red line is a Bear Market signal. A Bull market finds support at the green line.
In the previous severe bear markets we can see that price bounced at the black line and recovered to the red and green lines but turned back down again. How the market responds to these levels in the weeks and months ahead will therefore be critical.
The long term oscillator is now weakening into a long term Sell Signal.
If the market is entering a severe Bear Market we can see that there is significant downside below 2500, but for now the market is endeavouring to avoid that outcome.
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2020 is bringing some fast and furious action in the market with a range that became increasingly expansive since the move above 2500 in 2017. We can only assume that this will continue. This is a Brave New World.
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Regardless of whether the market can recover or whether further significant lows are ahead of us, the simplicity of the proprietary price based S/T Signalling System will continue to keep us on the correct side of the market, with price currently back on a Buy Signal since moving above 2521 on 06 April 2020.
If you would like to learn more about using the S/T Signalling System please get in touch.
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To receive detailed daily analysis, guidance and the updated daily Buy / Sell trigger levels being generated by the Trading the Line system before the market opens, and intra-day alerts when appropriate, please become a Member and Sign up for Alerts & Observations - includes access to Members Area, Explanatory Notes (pdf) for all of the concepts discussed, and Notes on Day Trading (pdf)
Disclaimer: This is the diary of a personal trading system, its methodology and the signals that it is producing. You are welcome to follow along but please understand that the information presented here is for educational purposes only. No recommendations are being made to buy, or sell stocks, options or futures contracts. Please consult your own financial advisor before making any investment decisions.
