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

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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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2020 03 27 19.16.29


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.

Trump Support Level 290320

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


SP 500 290320

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.


SP 500 290320 2

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 290320

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.

Usdchf 290320Managed to short USD/CHF near the highs, which gives a good swing trade.


Usdsgd 290320Also 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.

Gold 290320There 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.


2008 Crash ReboundsIf 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.


SP 500 290320 3Last 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?

Trading Profits 280320

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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! ??


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Testimonials 250320

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