Death Cross & a Test

bitcoin, forex, stocks, ETF, volatility

Although I do passive investing 95% of the time, I do keep an eye on the general market gyrations if there’s something notable happening. For example, the recent market sell offs. Of course my 401k looks like 351K now, but this is to be expected considered the lunacy we’re seeing in Federal Government right now.

The markets have been selling off like crazy lately and everyone is trying to come up with a reason. Is it the Trump tariffs? Bond yields inverting? Apple earnings? Usually it’s a combination of all of the above. The market is trying to desperately price in all known things and even account for unknown knowns.

Death Cross

If you look at the daily chart below, the S&P500 had a very bad December. It had a death cross (50DMA drops below the 200DMA). That’s a very ill omen considering the index started showing weakness around the beginning of October.

S&P500 Daily Chart with a Death Cross at the beginning of December 2018

Sure we had some rebound since the end of 2018 but I expect lots of volatility in January and possibly beyond. I’m not worried yet because of the weekly S&P500 chart. There are no death crosses there, just a nice test of the 200 WMA.

S&P500 Weekly Chart with a test of the 200 WMA at the end of December 2018

That weekly candle in the last week of December 2018 is like classic textbook test of the 200 WMA. It tried to pierce but failed. My guess is that the institutions were watching those levels like a hawk and initiated the buy programs like crazy to try to save this bull market.

Let’s wait and see

I’m definitely taking a wait and see attitude now. If the markets start to firm up and close out January on a solid footing that I’d say the most of the market lunacy is passing. Not passed, just passing. There’s a lot of unknown unknowns happening in Washington DC right now that the markets are definitely on edge. As long as we don’t have a death cross on the weekly charts, I’m not too worried but look at this volatility as a perfect time to rebalance and up my dollar cost averaging.


Also published on Medium.