Stock Market Looking Ugly... Lifetime Opportunity?!
Now I know...
Now I know how girls feel when shopping season arrives. I've never been more excited/afraid of the stock market as I am right now. Everything is at a discount! REITs, ETFs, individual stocks, everything! This is the best opportunity we will have in our lifetimes! I'm speaking purely from a financial point of view of course... but is this it? Has the market bottomed? Let's check the charts...
The SP 500 is an American stock market index that follows the top 500 companies in the US, this is one of the best indicators around to see the strength of the stock market, and SP500 ETFs are one of the best financial tools around to invest in! Let's check the charts and compare with the past.
Right now, the SP500 is under the weekly 200MA. The weekly 200MA is the MA that supports us in a normal market before an actual recession happens. Being under this MA is bad! And even worse is the fact that we just retested it and there was a clear lack of force when we touched it... a retest without a breakthrough normally leads to a dump, so, I think this scenario is really good for a short, a long-term short that might take months to bottom!
In 2008 the same thing played out, just much less violently, the SP500 went under the weekly 200MA, retested it, and then dumped 40-50%.
The bottom was around the same time the weekly 200MA and 100MA crossed upwards, so this might take months to actually bottom and reverse upwards.
The Dow Jones Industrial Average is the stock market index that closely follows the 30 largest companies available in the stock market, which is a pretty good indicator too, even though I consider the SP500 much better since it has a larger sample pool.
The DJI is also under the weekly 200MA, it also rested it without any clear sign of wanting to go above it... it's the same signal as the SP500, a bad signal! Or good if you want to go short...
Some individual stocks are showing good signs of strength even through all of this, stocks that are more closely related with the internet like Netflix, Facebook, Alphabet, Amazon, which makes sense since everyone is at home quarantined, the only thing they have to do is surf the internet and buy products from Amazon to satiate their consumerism.
All-in-all, this virus is giving us a lifetime opportunity to buy some good ETFs at cheap prices. And all signs point to many more months of this scenario... The world is quarantined, and there is no flow of money, people aren't being paid, people are not working, people are not spending, most stocks and cryptos are being sold to buy food (and toilet paper). There is no demand coming from retail to the stock market... most are worried that they are going to starve if this keeps going, and the companies are also running out of money because no one is buying!
And I do think this is just the start, the USA isn't doing enough to prevent the spread of Covid, it's going way too fast, and if they don't stop it, the hospitals will get flooded and there won't be enough medicine and ventilators for everyone, just like it's happening in Italy. The market was already in a bad place, and this virus not only popped it but also made it even worse then it was supposed to be!
The only way for the market to not slip even further down is for the US, Europe, China,etc... to print lots and lots of money, devaluing their currency and buying stocks, or for all the market to close down for weeks... no more free-market.
Question of the day: Do you have cash ready? Or have you deployed your whole cash?