In the wake of coronavirus-related volatility in the stock market, investors are asking: “Is the economic data showing that there will be a depression?”
The No. 1 mistake investors make as they try to figure out the answer is that they are mostly focused on one dimension of a two-dimensional problem.
The second dimension is the time frame, or the duration. As an example, new weekly jobless claims published Thursday came in at 5.245 million versus a consensus of 5.0 million. On the surface, that is a terrible number.
In our analysis at The Arora Report, the number of new jobless claims is in the process of peaking in the near term. In isolation, at this time it can be considered positive for the stock market. However, in a longer time frame, investors need to consider the possibility of a second wave of job losses if opening the economy takes longer.
Let’s explore this issue with the help of two charts.
Charts
Please click here for an annotated chart of the SPDR Dow Jones Industrial Average ETF DIA which tracks the Dow Jones Industrial Average DJIA.
Please click here for an annotated chart of the SPDR S&P 500 ETF Trust SPY which does the same for the S&P 500 Index SPX.
Note the following:
• The first chart, which is monthly, gives investors a long-term perspective. For more details, please see “Wall Street wants you to believe everything is peachy.”
• The second chart, which is daily, gives investors a short-term perspective.
• Both charts show RSI (relative strength index). RSI is an indicator of internal momentum of the stock market.
• The first chart shows that RSI is barely poking its head over the oversold level.
• The second chart shows that RSI is overbought.
• Those with less experience may ask: “How come RSI is both overbought and almost oversold at the same time?” This question is wrong because it omits the second dimension of the time frame. RSI is almost oversold on a long-term basis but is overbought on a short-term basis….Read more at MarketWatch.
A knowledgeable investor would have turned $100,000 into over $1,000,000 with the help from The Arora Report. NOW YOU TOO CAN ALSO SPECTACULARLY SUCCEED AT MEETING YOUR GOALS WITH THE HELP OF THE ARORA REPORT. You are receiving less than 2% of the content from our paid services. …TO RECEIVE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES, TAKE A FREE TRIAL TO PAID SERVICES.
Please click here to take advantage of a FREE 30 day trial.
Check out our enviable performance in both bull and bear markets.
