As investors ruminate over “buy” and “sell” decisions concerning their portfolios, there are two new developments. Let’s explore with the help of two charts.
Please click here for a chart of Dow Jones Industrial Average ETF DIA, which tracks the Dow Jones Industrial Average DJIA.
Please click here for a chart of volatility ETF VXX, which represents the volatility index (VIX) in the benchmark S&P 500 SPX.
Note the following:
• The first chart shows that The Arora Report gave a signal to buy leveraged inverse ETF SQQQ or short-sell Nasdaq 100 ETF QQQ, which represents the Nasdaq 100 Index, near the top of the stock market. An inverse ETF goes up when the stock market goes down.
• The first chart shows that the Arora Report gave a signal to book profits and exit the leveraged or short positions.
• The Arora Report is tactically reducing hedges.
• The first chart shows the stock market touched the top band of the “mother of support zones” and has now bounced. This is often the case for short-term tradeable bottoms.
• The first chart shows that the volume has gone higher but is still not high enough, considering the carnage in the stock market. This indicates that a capitulation has not yet occurred. A capitulation is often necessary for a lasting bottom.
• Without capitulation first, rallies tend to fail.
• The second chart shows a dramatic drop in VXX. This indicates that investors are nowhere as fearful as they were before. This is often considered a short-term buy signal for the stock market.
Newfound bullishness
It is no secret that Wall Street loves President Trump. Trump, of course, wants to get re-elected. He has made the stock market a measure of his success.
Trump has started making noises that he wants to lift the coronavirus restrictions. It is understandable. Who wants to be confined to their home? It is not the coronavirus itself, but the response of the country to the coronavirus that is doing the damage to the economy and the stock market. The rich are still comfortable but ordinary investors with 401(k)s are suffering. Working-class people and small businesses are in trouble.
Based on the foregoing, is there any reason to lift the restrictions and keep the economy going? Many health experts think it is dangerous and premature to lift them. Here are the reasons health experts give:
• The community-spread chain is not yet broken.
• Easy, widespread testing is still not available.
• There is simply not enough data available to make such an important decision.
Those with an eye on moving the stock market higher counter that the cure is worse than the disease, as Trump has said. They are floating the idea of letting younger workers go back to work while restricting older workers. The health experts counter by saying it is a myth that only older people get serious ill from the new virus. Further, those younger people who get sick may spend a couple of weeks in the ICU and have lasting damage.
Who is responsible and who is irresponsible? I will let you decide….Read more at MarketWatch.
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