A Message From the Great Depression and Black Monday for S&P500. Lower Prices for Crude Oil?

A Message From the Great Depression and Black Monday for S&P500. Lower Prices for Crude Oil?

What a week!!! The fastest end of a bull market ever. Investors and businesses are in search of liquidity. And that would continue especially for the businesses. Many companies in many countries will face the ultimate test of survival.

CRUDE OIL

Some of those companies are from the energy sector. The last Commitments of Traders show that Commercials stopped their buying and even sold more compared to the prior reporting period. Look at the next chart.

Crude Oil and Commitments of Traders

All that lack of buying happened at a lower price. That is highly unusual and is a sign that the big guys in that market are expecting even lower prices. 

Price action trading has a message for us here. If on Monday, the market breaks above Friday's high the probability is very high to see that day closing even higher.

My strategy here would be to prefer short signals. 

U.S. STOCK MARKET

Except the volatility which grew bigger and bigger nothing else changed here. Stimuli from Central banks, the sentiment is showing extreme pessimism and the panic is everywhere.

With so high volatility we can go on a lower time-frame. There, following the direction from the daily chart we can take advantage of the higher volatility with day trading.

How long can it continue like this?

Look at the charts below.

They all show a comparison between the chart of Dow Jones in 1929, 1987 and 1990 and S&P500 from 2020.

Great Depresssion

Black Monday

1990


All those moves from the past show some similarity with the downfall we are witnessing now. All this suggests that after such a strong panic selloff, the decline might be over. It also suggests that the recovery won't be fast. But to position ourselves, we should wait for a higher-short term low. It will show a good buying point and will protect us from another severe decline.


Now, let's find your missing piece!

Vassil Banov,
Founder of Piece of Trading



Trades mentioned here are either taken or will be taken by the author if the right conditions appear. They are NOT recommendations nor any of this constitute investment advice. Please read the Risk Disclaimer

Charts made with TradeStation®. tradestation.com

TAGS: S&P500, SPY, SPX, COT, Commitments of Traders, Down Jones, Crude Oil, Price Action Trading, Great Depression, Black Monday

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