Blog: Market Analysis

If you have been keeping up with the news, you will know that oil futures (May) have hit negative territory for the first time in history, and that has spooked the stock market as well.

Going forward, will this be the catalyst that causes another leg down in the stock market, or will we see the lockdowns ending soon, and the economy returning to normal?

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Did You Catch This Epic Oil Crash?

If you are wondering why oil prices managed to go negative, the reason is quite simple:

Oil costs money to store.

Due to the economic collapse, oil isn’t being used much.

So all the storage facilities are filled up. So nobody who can store it will buy it from you.

If you want to get rid of oil, you have to pay someone.

When oil was trading at $20, we were already short with a target of $10.

To be honest, I did not really think it could go that low, and was prepared to take profits along the way.

But sometimes if you get the direction right, you might get lucky and enjoy a windfall profit.

It is worth noting that only the May contract dropped drastically, while the June and July contracts remained much higher.

This means that traders are expecting some economic recovery (and an increase in demand?) in the coming weeks or months.

Something interesting to note is the divergence between stocks and oil, shared by one of community members.

How Will This Affect the Stock Market?

Comparing across different asset classes, we can see that crude oil and the 10-year treasury are bearish, while the long-term treasury bonds and Gold are bullish.

The S&P 500 is somewhat sideways, and has not decided which way it would follow.

Most fund managers seem to think that the recovery will be U-shaped, meaning we can expected a prolonged sideways movement in the stock market while the real economy takes its time to recover.

The second most popular option is the W-shape recovery, meaning they expect another leg down to test the prior lows. This one has my vote as well.

And lastly only 15% think a V-shape recovery is likely.

Based on what I posted last week, there are 2 potential areas which I feel offer a high probability short trade, and if prices manage to clear the 3000 level, then I will rethink the W-shape hypothesis.

Updates Regarding the Covid Situation

Although the number of cases seem to have peaked in most major economies, and the US might want to relax its lockdown and resume the economy, there is a high risk of a second wave of infections, which might actually drive the second leg down of the stock market.

Also, the number of cases in developing countries seem unusually low, which is likely a case of not doing much tests. Hence there is a real risk that we might see an explosion of cases once the testing scales up.

Now that things have started to stabilise, many countries are starting to point fingers at China for their slow disclosure of the virus, thus allowing it to spread globally and wrecking havoc worldwide.

This could lead to more global tension and conflicts going forward.

As you can see, there are always many exciting trading opportunities in the markets, and I think that another big move is coming really soon, so now would be a really great time if you plan to start learning about trading & investing.

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Spencer is an avid globetrotter who achieved financial freedom in his 20s, while trading & teaching across 70+ countries. As a former professional trader in private equity and proprietary funds, he has over 15 years of market experience, and has been featured on more than 20 occasions in the media.

Market Pandemonium – Stocks Rebound, Oil Plunges, Gold Surges

For the past few weeks, we have seen a strong rebound in stocks, but at the same time, we have also seen a plunge in Oil, crazy volatility in the USD, and a surge in Gold.

How can we make sense of this crazy market, when it seems like everything is moving in different directions? Does it mean it is risk-on for now, and is the market bottom already in?

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Is the Stock Market Bottom In?

To be honest, no one really knows at this point.

After reading all the different articles, news, opinions and data, it seems the consensus is pretty split on this.

I also did a poll on Telegram, which seems to favour more downside.

So is it possible that we are actually here?

Let’s take a look at the arguments for each side.

Bullish case:

Slowing number of cases and hospitalisations after lockdown measures
Possible that lockdown will end soon and economy returns to normal
Unprecedented fiscal and monetary policies to boost economy
Only certain industries are hit pretty bad, the rest of the economy is still ok
It is a matter of time before a vaccine is found
China is already “back to normal” after lifting their lockdown

Bearish case:

Permanent damage to the economy – lost jobs, businesses shut down, loan defaults, etc
Less future spending – change of habits, less discretionary spending
Lockdown (full or partial) may last a really long time
2nd wave of infections after lockdown is lifted
Domino effect of economy failure has yet to really kick in
Fiscal & monetary policy is insufficient to save the economy

How to Swing Trade the Stock Market?

If I had to put a number on it, I would say I am 60% bearish, and 40% bullish.

Based on this opinion (and of course studying the price action), my general strategy is to do short/medium-term bullish swing trades, while at the same time looking for an opportunity to take a long-term bearish trade.

This will allow me to profit from the short/medium-term price rebound, based on the price action, but also not miss out from the potentially bigger long-term move down, should it happen.

From the chart, the strongest level of resistance is the gap around the 2900-3000 level, so if prices manage to close and stay above that, then I will reconsider my bearish hypothesis.

Tesla – Very Strong Price Rebound

After the sharp plunge when the stock price was almost hitting $1000, Tesla fell sharply to the $380 to $400 buying zone, which was the area I was planning to accumulate the stock.

It had an amazing rally after that, and as of today’s closing it is up almost 90% from my initial entry price. Congrats to those who took the trade with us!

Crude Oil – Double Whammy Selldown

Crude oil was very unfortunately to suffer a confluence of bad news, including price wars, and a huge decline in demand due to restriction of travel.

As price continues to drift down, we have seen the main exporters try to put together some deals and supply cuts, but the problem is that demand is too low, and even with a decrease in supply, there is still an increasing supply glut.

So unless we see lockdowns being lifted, and the economy going back to normal, we can expect crude oil to continue falling. This will get worse the longer the lockdown lasts.

Gold – The Hedge for USD

After seeing how the Fed (and almost every huge economy) is printing billions and trillions of dollars to save the economy, it is highly possible that we might see a devaluation of the US Dollar in the long-run.

For many traders and investors, they see Gold as a good way to hedge against the decline in value of the USD, which could explain the huge surge in Gold prices.

Thankfully, we managed to start buying in near the lows, and slowly accumulated on the way up.

As I mentioned in the post, I think this is a good medium/long-term trade, so for investors, you might want to add some of this in your investment portfolio as well.

Want to Start Your Trading Journey?

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Market Rebound – Is the Worse Over, or Will there be Another Wave of Selling?

Last week, after a 30-35% plunge in the major stock indices, we finally saw a substantial rebound of 15-20%. The next major question is, is this the start of the recovery, or is this just a dead cat bounce before the “real” collapse?

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Catching the Stock Market Rebound

Last week, the main trading play we were going for was catching the rebound in the S&P 500.

There were several reasons for the this rebound:

No significant rebound during the 30-35% plunge of the stock market
Strong fiscal and monetary support from the US government
Measures to fight the Coronavirus taken by various countries
Price is testing the “Trump Support Line” – the level of the S&P 500 when Trump took office in 2017.

I was guessing that he would try everything to keep the market from dropping below that, because it would affect his re-election chances.

After accumulating much long positions, I managed to pin-point the exact day which the rebound happened on the daily chart, and stack more positions on the breakout.

The subsequent rebound was huge, about 20% over 3 days, and this allowed up to take profit on all the long positions which we had been accumulating at the lows.

Zoom – Best Performing Stock

Zoom (NASDAQ: ZM) was one of the best performing stocks, and was already bullish even as the rest of the market was in decline, since more people were using it during the work-from-home and home quarantines.

We spotted a bull flag early, which enabled us to get in just before the large explosive move in the stock price.

Weakening of the USD

Due to the large fiscal package of $2 Trillion and the unlimited QE amongst other aggressive monetary policy, the USD has weakened, allowing us to short the USD/CHF and USD/SGD to ride the wave down.

Managed to short USD/CHF near the highs, which gives a good swing trade.

Also shorted USD/SGD near the highs, though if there is action from MAS (Monetary Authority of Singapore), we could see further weakening of the SGD instead.

Surge in Gold Prices

Due to potential weakening of the USD, we also saw Gold prices surge, after rebounding from the 200-EMA.

There was some trouble in the Gold market, due to a limitation in supply, which caused a disruption to liquidity providers.

What’s Next for the Stock Market?

As I mentioned earlier in the post, there are some positive factors coming out, but I don’t think it is enough, at least until we see the Covid curve for major economies start to flatten.

If we take a look back at 2008, there were 6 major rebounds ranging from 10-25% before we saw a real bottom and recovery in the market.

Currently, this is only the first rebound, which means that it is very likely not the bottom yet.

Last week, the play was to accumulate longs for the rebound.

This week, I think the play will be to accumulate shorts for the next wave down.

Currently, I have already accumulated some short positions, and I am prepared to add more as my market unfolds according to my roadmap.

How Was Your Trading Last Week?

Another exciting week of trading, with more than 200% ROI (that’s 3X!) on my trading account for the month! ???

Had great fun discussing and guiding everyone in the private group chat throughout this roller-coaster ride of profits, and I look forward to next week! ??

Many people say that you cannot time the market, but actually what they mean is that they do not know how to time the market.

One of our new student went in $70k yesterday for a swing trade, and made 10% returns overnight! ???

One night of trading has made him back several times his course fees, so if you are interested to start your journey with our community, click on the link below:
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Long-Term Chart Analysis of Various Financial Markets (Stocks, Forex, Bonds, Commodities)

Recently, we have seen huge volatility and huge moves in the market, which have confused many traders and investors, so in this blog post, I am going to take a step back and look at some weekly charts to give an overview on the market direction for various markets, including stocks, forex, bonds, commodities, etc.

While the first wave of sell-offs were mostly panic-driven, the next wave of decline would likely be driven by fundamentals.

Looking at this strength meter, we can see that the safe haven assets like the USD, Gold, CHF and JPY have performed the best, while commodity-related currencies like the NZD, AUD and CAD have fared poorly.

Here’s a video on how you can use this knowledge in your trading:

Daily Trend Analysis

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US Dollar Index (DXY)

Despite the Fed cutting rates to zero, launching QE4, extending the repo program to $1.5 trillion, extending USD swaps to multiple central banks across the globe, and a potential $1-2 trillion fiscal package, actions which should technically weaken the USD have instead caused the USD to surge.

The reason for this is that about half of global trade is denominated in USD, and a lot of corporates and governments take up USD debt. When liquidity dries up, you will see people liquidating all other assets to buy USD, hence the tandem plunge in almost all assets, and rise of USD.

Looking at the chart, the USD has been on the rise since 2008, and as more businesses fold up, and liquidity dries up further, this could very possibly push the USD to new highs.

Thus, we can expect most currencies to be in decline relative to the USD, but to varying degrees.

Euro vs. US Dollar (EUR/USD)

The EUR/USD has been in a large uptrend channel for more than 40 years, and now it is hovering at the lower edge of the channel.

If the trendline is unable to hold, we might see prices head down to test the 0.8250 levels.

Currently, Europe seems to be one of the worst-hit regions, and this could cause lasting damage to its economy.

British Pound vs. US Dollar (GBP/USD)

The GBP/USD is also showing great weakness, breaking to new lows. It has been on a downtrend since 2008.

In the medium-term, we can expect a test of the most recent support-turned-resistance level of 1.2084, and if that holds, we will likely see a continued slide of this pair.

Australian Dollar vs. US Dollar (AUD/USD)

The AUD is one of the weakest currencies in recent times, and after breaking below the lows of 2008, we could see the AUD/USD heading to the next support level at 0.4873.

In the medium-term, we are likely to see a test of the most recent support-turned-resistance level of 0.6113, before it continues lower.

NZ Dollar vs. US Dollar (NZD/USD)

The NZD/USD is sightly less bearish than the AUD/USD, but it is also falling fast against the USD, and might be heading to test the next support 0.4905.

Currently, it has found some support at the 0.5596 level, so there might be some medium-term rebound or sideways movement.

US Dollar vs. Canadian Dollar (USD/CAD)

The USD/CAD has a huge pattern forming since 2008 that resembles a hybrid between a cup and handle pattern and a double bottom pattern.

Both are bullish patterns, which suggest that in the long-run this currency pair will continue to stay bullish.

In the medium-term, it has run into strong resistance and may take a while to break past that.

US Dollar vs. Swiss Franc (USD/CHF)

The USD/CHF has been on a long-term decline, and for the past 8 years or so, has been forming a giant rising wedge, which is a bearish price pattern.

The pattern had a breakout this year, but the USD has surged back to the covid crisis to test the breakout point.

I believe that in the long-term, the downtrend will continue, so I will be looking for good shorting opportunities once the USD demand starts to wane.

US Dollar vs. Japanese Yen (USD/JPY)

In 2014, the USD/JPY managed to break above the long-term bearish trend line, but instead of heading up, it went into a sideways movement for the next 5 years.

This pair is tricky to trade because it is rangebound at the moment, and both the bulls and bears are quite balanced.

In the long-run, we will need to see whether it breaks up or down from the consolidation pattern.

US Dollar vs. Singapore Dollar (USD/SGD)

Since the Singapore economy is very export-oriented, and perhaps because the SGD gets lumped in with other Asian currencies, it has seen much much weakening since the start of the crisis.

The USD/SGD has soared strongly to the resistance (prior swing high) of close to 1.46, and looks like it will be breaking that to test the next level at 1.5572.

I have taken many swing trades to ride this strong trend, which has been very profitable for me and my students.

Since I live in Singapore (and use SGD currencies), but the bulk of my investments (and warchest) are in USD, I have actually seen a 8-10% ROI on my whole portfolio just due to the gain from the exchange rates.

S&P 500 Index (SPX)

The S&P 500 has corrected to around 30-35%, in the steepest drop ever on Wall Street, and it has broken past the previous swing low in 2018.

There is no doubt that it will continue to decline, and various analyst estimates have predicted targets ranging from 1800 (which is the 2016 swing low) to 2200.

This suggests a further decline of 10-30% from current price levels.

Since I have bought in near current levels using about 20-30% of my funds, my maximum portfolio drawdown is only 10%, which is pretty much offset by the forex gains (from the appreciating USD).

So for those wondering if they should liquidate their portfolio now, here is some useful advice:

I was expecting a short-medium-term rebound of sorts, before the next wave of selling kicks in.

We started accumulating longs near the low in anticipation of a rebound, but the rebound fizzled out, so we only manged to make a small gain on our positions.

Originally I was expecting a small rebound (correction in price) due to the extreme oversold conditions, but if the bearish sentiment is so strong, it might just drift sideways (correction in time) instead.

If the lows of the 3-bar range are taken out on Monday, then we can expect the downtrend to continue, if not we might see a correction (either in time or in price) play out.

Either way, we are looking for a good opportunity to short, but the precision in timing is important.

US Long-Term Treasury Bonds (TLT)

While bond prices usually spike when interest rates get cut, the TLT had a spike, but it was immediately followed by a plunge, perhaps due to liquidation of bonds for cash.

Technicals-wise, it has broken above a bullish trendline, which could suggest an acceleration of the uptrend in the long-run.

However, with interest rates already at zero, it is hard to see what other catalysts might push it upwards, and we might see short/medium-term cash outflow for liquidity, and long-term outflow into stocks once the market bottoms.

Gold (XAU/USD)

Typically, Gold is supposed to act as a hedge against market declines, by having an inverse-correlation with the stock market.

However, this time we saw a sell-down in Gold as well, probably due to liquidation for cash as well.

On the chart, from 2013 to 2019, we saw Gold carve out a sort of double bottom consolidation hybrid pattern, before breaking out and surging up.

While the price action does not look good in the short/medium-term, I think it still looks bullish in the long-term.

Crude Oil

Due to a confluence of price wars (increase in supply) and a sharp drop in demand, we have seen the price of Crude oil drop sharply to new lows.

The next major support level is at around $10, but we will probably see some intervention before that.

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Is the Bear Market Over, or is it Just Starting? (Risks & Opportunities)

Recently I have been receiving a lot of emails and messages asking about the market, and also an unprecedented number of people joining my private trading network, and the obvious reason for this is that the markets now are offering excellent trading opportunities.

Heading into Bear Market Territory

Last Thursday, we officially saw the stock market enter the bear territory, with a 20% correction from all-time highs.

Many people tell me that it is impossible to time the markets. But is that really true, or are they just parroting something they read online or from a book?

Take a look at the 2 charts below. The one on the left is the chart I posted for my students on 27 February 2002.

Now take a look at how accurately it played out on the right, which is the what actually happened.

Now imagine if you had that roadmap on the left, how much money would you have made, or how much money would you have saved by liquidating your portfolio before the full crash?

How Much Did You Make from This Crash?

While most “value investors” or “long-term investors” are complaining about how badly hit their portfolios are, the truth is that the only thing they can do now is quote Warren Buffett and hope that the market rebounds in the long-run.

Eventually, it probably will, and I will also be buying in once the crash is over, but why would I want to sit through a crash that can be avoided?

And more importantly, why would I want to miss such a great money-making opportunity?

These past few weeks of steep declines have probably been some of the best trading days I’ve seen in my career, allowing me to more than double my trading account (ROI of +169.54%) in this short span of time.

This is probably more than most people’s one year salary. Yikes!

And I am glad to be able to guide my students (including complete newbies) during this period of time to generate awesome returns as well on their trading accounts.

Swing Trading Opportunities

With the market in such turmoil (and high volatility), there are going to be a lot trading opportunities on the intraday and swing timeframe, but you will need to have the right skills and techniques to trade these markets.

I would also recommend using smaller lot sizes to trade if you are not used to fast markets.

For example, in my trade below, I used a very small 0.01 lot size to take quick trades on the S&P 500, which allowed me to make US$671 on just one trade in a few minutes.

If you take a couple of such trades a day, and use good money management to pyramid or stack positions on strong setups, it is not hard to generate 5 figures a day in such markets.

Of course, these are not normal market conditions, and I do not know how long they will last, which is why we need to make the most of it for the next few weeks.

Roadmap for the Bear Market

Some of the common questions I have been getting:

How long and how deep is this correction going to be?
When is the virus going to peak?
When should I start buying?
What should I be buying?
Should I sell off my portfolio in case it falls more?

In my opinion, a lot of factors are hard to predict, and this crash is unique because it happened so quickly.

The 2008 crash took 18 months to correct about 50-60%, while this time we took about 3 weeks to correct 25-30%.

That’s insanely fast. some people have not even had the chance to panic sell yet. ?

Although China has mostly managed to control the spread, and is on the route to recovery, many countries in Europe, Middle East and the US are still seeing and exponential increase in cases, so what we want to see is a deceleration of cases, so that from there we can estimate where the peak is.

If you look at the graph of all the past corrections in the S&P 500, there are only about 5 times in the past 55 years where it has gotten worse then this. (Also don’t forget to join our free Telegram channel for daily market updates if you click on that link.)

Personally, I do not think the bottom is here yet, and after consulting my charts over the weekend, I have come up with another roadmap for the next few months.

To be fair, I will only be sharing this new roadmap with my students, and I will continue to monitor the markets daily so that I can update them when I feel that it is time to start buying.

The Once-A-Decade Opportunity

Anyway, if you have missed the move down, do not despair, because the next big opportunity is the move up, once the decline ends.

Opportunities like this to multiply your wealth only comes once in a decade, so if you don’t want to miss this chance, I would like to invite you to join our private network with an awesome community of traders.

If you would like to avoid missing out on any of such awesome trades (which we deliver on a daily basis), then you should definitely check out our training program & trading signals bundle:
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See you on the inside! ???