At a time when coronavirus cases have exceeded one million worldwide, investors are trying to determine the next step for the stock market. This analysis has become more complicated due to the huge movements of crude oil which should be considered questionable. as demand for crude oil has fallen off the cliff due to coronavirus closings. There is a strong correlation between crude oil and the stock market. If that were not enough, there are anomalies in the jobs report.
Please click here for an annotated chart of the Dow Jones Industrial Average ETF
following the Dow Jones industrial average
Please click here for an annotated graph of crude oil futures
Investors who aren’t comfortable with oil futures can look at an oil ETF like the United States Oil Fund
Note the following:
• The first graph is a monthly graph to give investors a long-term perspective.
• The second graph is a 15 minute graph to give investors a very short term perspective.
• The stock market was showing all the signs of a fall and testing the old lows when President Trump said that Saudi Arabia and Russia would cut crude oil production by 15 million barrels, as shown in the second graphic. First there was a report from Russia on the denial of any deal, and then there was a report from Saudi Arabia stating that Trump had exaggerated. The second graph shows that oil has declined on reports from Russia and Saudi Arabia.
• The second graph shows that oil was still shrinking when news of an OPEC and Russia meeting arrived. It also shows aggressive buying of oil by the momo (momentum) crowd on the news.
• Futures contracts on the stock market fell significantly for coronavirus cases exceeding one million, but were driven by a very strong upturn in oil.
• The first graph shows that the RSI is far from the last major bottom. This indicates that the stock market may continue to fall.
• The first graph shows the “mother of support zones” for the stock market. For more information, please read “The stock market is getting dangerously close to the ‘mother of support zones'” The graph shows that the stock market hit the top band of this support and then rebounded down from the support zone. superior support / resistance shown on the graph. Such behavior is common and should be expected.
• The employment report showed that the March non-farm payroll dropped by 713,000 against a consensus of 250,000. There are several anomalies here. The investor should consider ignoring this employment report, as well as the previous initial unemployment claims report.
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Even though the stock market has recovered from its lows, there has been no clear signal. As we wrote earlier, the strongest rallies happen in bear markets. Rallies of around 20% are expected. In this coronavirus-influenced stock market, it is important that investors use an objective framework of protective tapes before buying stocks. For more details, see “Investors in the stock market are asking” Should I buy or sell? “. Here’s how to decide. “
Semiconductor stocks have been leading indicators for the stock market. For this reason, it is important to monitor semiconductor stocks such as AMD
It is also important to monitor large cap technology stocks such as
Disclosure: Subscribers to the Arora report may have positions in the securities mentioned in this article or may take positions at any time. Nigam Arora is a trained investor, engineer and nuclear physicist who founded two fastest growing Inc. companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be contacted at [email protected]