Friday could be “D day” for stocks

If we make it through Wall street could scale new all-time highs . Expect sharp drop if we don’t.

A one group of companies will likely determine the next big move in stocks...

Some of of the largest companies in the stock index are due to report their latest business results.

The big techs release their results after the stock market closes tomorrow... $660 billion social media firm Facebook (FB), $1 trillion Internet giant Alphabet (GOOGL), $1.6 trillion consumer electronics behemoth Apple (AAPL), and $1.5 trillion online retail and web services giant Amazon (AMZN).

Those seven businesses represent about $5.3 trillion in market value... They're indicators of how the U.S. economy is doing... And they're all part of the tech-dominated Nasdaq 100 Index.

Since late March, the Nasdaq 100 is in a big uptrend. Over the past few months, the index has traded in a tight, rising range called a "channel"...

You can see the Nasdaq 100's rising uptrend channel line in my chart. If it breaks below this trend line that I believe is the most important inflexion point it could be make or break for the market.

If tech leaders report weak earnings, the Nasdaq 100 could break down from its channel...

That would be a big short-term warning sign. Tech stocks have been the leaders during this recovery. So if they close below the lower boundary of their channel (for at least 2-3 consecutive days), the Nasdaq 100 could face a quick 10 to 15% decline, down to its June low around 9,940

Whether the Nasdaq 100 continues higher or drops lower, the other major indexes will likely follow.

I’m currently holding gold, silver, gold stocks, and bitcoin, which I think is in the midst of a multi year bull market.

With Apple, Facebook, Google, and Amazon reporting tomorrow afternoon, just be sure to have your ducks in a row before then.

All posts and charts are for educational and illustration purposes only

Gold, Precious Metals , Crypto’s and Dow’s Price Action

Gold, Precious Metals , Crypto’s and Dow’s  Price Action

Gold nearing all  time high , precious metal  and crypto’s breakout.  Spot Gold is approaching its all time high at 1920 (last done 1900) , silver  broke above the US$19.54-21.09 resistance with  Platinum and palladium joining the party . Crypto currencies in Ethereum and Bitcoin are breaking out too. On the equity front, The Dow last traded at 26469 could be weak in the short term , heading for its support at 26277 and 25748. Nasdaq last traded at 10483 could be poised to test its 10120 support .  Silver’s break above the US$19.54-21.09 resistance zone on Wednesday triggers the bullish implication of its 2015-2020 basing pattern. This breakout is equivalent to gold’s January 2019 breakout and supports an ultimate upside target for silver of US$31.80-32.00. In the short term, silver is in “overbought” territory so there are risks of a short-term pullback/correction. However, with both the daily and weekly momentum indicators confirming the breakout, short-term pullbacks should be seen as buying opportunities in anticipation of a move up to the US$31.65-32.10 area. The old resistance zone at US$19.54-21.09 is now seen as support. Looking at the silver/gold ratio this week’s surge in silver has the ratio breaking out of the 2012-2020 downtrend channel suggesting further outperformance in silver over gold For Crypto, Ethereum’s breakout last Wednesday from the June-July trading range targets US$217-248.00. This breakout in turn has confirmed a larger move from the 2019- 2020 consolidation pattern which supports a minimum upside target of US$365- US$400. While Bitcoin is lagging Ethereum the chart setup is similar. The breakout from the May-July consolidation pattern implies an initial upside target of US$12,200-12,500. 

All posts and charts are for educational and illustration purposes only

UOB - Testing Support

UOB - Testing the uptrend channel support line again. A break below this line could take it down to the next support at 20.05 and 19.50. Last done 20.62.

All posts and charts are for educational and illustration purposes only

Risks on the Horizon

The “second wave” concerns have obviously accelerated over the past week to the to the irritation of the Donald. The President celebrated the good job number describing it as “spectacular news for American workers and American families”, promising to “vanquish” the coronavirus.

White House continues to draw comfort from the growing divergence between cases and deaths in America. While new cases hit new high, average daily new deaths have declined by 65% from the peak reached in April. 

The morning it was reported that the virus situation in US has turned for the worse Florida and Texas hit a record number of daily coronavirus cases on Saturday, respectively reporting 11,445 and 8,258 new cases in the last 24 hours, according to figures released by the states’ health departments. 

There are plenty of risks next week as cases rise, states are now taking measures to try and control the spread of the virus. Investors may may be wise hedging against the prospect of more restrictions being imposed to slow the spread of the virus that could hamper the economic recovery.

Volatility to Spike?

Separately, there was a substantial increase in VIX options trading as well. Open interest for Aug. 19 70 calls by roughly 9,138 contracts on July 1, while open interest for Sept. 16 calls at 80 and 85 rose by 10,512 and 15,294, respectively.

There are plenty of reasons for a trader or institution to place these bearish bets or protective positions, especially given the significant advance in the S&P 500 off the March lows and that it currently trades at around 20 times 2021 earnings estimates.

Though deaths from the virus in Florida have remained on a downward trajectory, Surgeon General Dr. Jerome Adams has warned that fatalities lag new cases and a clearer picture might not emerge for two weeks or more. 

What would be very concerning is if deaths now start to rise meaningfully after a lag. So far affected states has resisted locking down the economy again but if the death rate rises , the pressure to lock down will mount  and the stock market which is currently building in a V - shape recovery scenario may be disappointed.

All posts and charts are for educational and illustration purposes only

Shanghai Stock Index - breakout out of 3 years downtrend.

China stock market awakening? Price action shows initial sign of a trend breaking out of its nearly 3 years downtrend and a nascent peak is emerging. It looks promising with an impressive volume. It is a possible sign that the institutions which have been underweight China stock market may be starting to make a comeback. Watch for signs of confirmation in the coming days.

All posts and charts are for educational and illustration purposes only