June 11


Market Commentary for June 12, 2020


June 11, 2020

Broke Support.  New Range Likely – But Watch 24,800 Down.

From yesterday, “The weakness that entered the market Wednesday was expected and orderly (no panic sell-offs), which tells me support will come in just below the Gap around 26,000 so it can continue its climb.  A drop through that level should be met with caution.”   We definitely dropped through 26,000, but it wasn’t a panic sell-off.  Just a slow and steady downward trend.  Now, we are looking at the major support level at 24,800.  If that doesn’t hold, it is probably a sign that fear has entered the market.  

DJIA – 39 Minutes 

The Daily Chart certainly looks scary with that big red bar.  As I said yesterday, “Due to the recent bullishness, I could see a case for holding Long Positions all the way down to 24,800.  But for short term trading, the 26,000 level is more important.”  Trading Short through the 26,000 level was certainly prudent today.  But as we reach that bellwether 24,800 level, all eyes will be watching to see if the market pushes through.  From my seat, we are about to enter a wide trading range as the Fed does everything it can to prop up this market – like saying that we will basically have zero interest rates into 2022.   

DJIA – Daily

Clearly, the market WAS ready for a rest.  We know that at some point, economics cannot be ignored; Is this the start of a new correction?  I don’t see how that could be the case with the bullishness we have seen the past several weeks.  People will be looking for new places to buy – not sell.  I just don’t see any fundamental or news drivers that can push the market lower.  That doesn’t mean they aren’t out there, just that they aren’t obvious.   On the other hand, the recent bullish sentiment WAS clear and obvious.

As I mentioned yesterday, “this is  a news-driven market and we need to keep watching for a change in sentiment.”    We saw that today, but “where’s the beef?” to quote a well-known commercial.  What’s the news causing it?  I think this was end-of-move selling, which was to be expected.  If it becomes overblown, or we form a lower high in the next few days, we will know that something is driving it down.  And of course, there will be plenty of pundits to tell us exactly what that was.  

Ed Downs 

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