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Trump's Trade War Market Killer

Published 10/04/2018, 02:03 pm
Updated 09/07/2023, 08:32 pm

Originally published by Guppytraders.com

The S&P Index shows the Trump honeymoon with the markets is over.

Look at the index activity from anytime in 2016 until 2018 January 29. The daily ranges - low to high - are small and about the same size. The general uptrend is not interrupted by days of significantly large daily ranges. It’s a smooth, stable trend.

By 2018 February the nature of the trend irrevocably changes. It changes volatility and it changes direction . First consider the volatility. After February the market is dominated by large daily ranges. The daily range between the low and the high expands dramatically and it remains very large – particularly when compared to the daily ranges of the previous 2 years.

After February the nature of the trend also changes. This is relentless volatility with sharp moves to the downside, fast short lived rallies and more market collapses. There is no stable trending behaviour. There is no reliable underlying trend.

This is all evidence of a market in turmoil and evidence of the end of an uptrend. The reverse – the beginning of a downtrend – is not immediately true. Its clear the uptrend has ended but the nature of the new downtrend is not yet clear.

Simple trend line analysis, and analysis with the Guppy Multiple Moving Average (GMMA) indicator show the long uptrend has decisively ended. The long term group of averages which are a guide to investor activity, have compressed, turned down, and have begun to develop separation. This shows investors are taking the opportunity to exit the market on rallies and sell the market short.

The short term GMMA shows investors have joined this selling At the end of March the short term GMMA moved completely below the lower edge of the long term GMMA. This is usually associated with the beginning of a downtrend.

The bulls identify a potential double bottom pattern round 2580 but this level has been broken by multiple intraday lows. Bears point to the double top trend reversal pattern that developed in February and March.

The major support area is near 2480. This is based on the consolidation area that developed in 2017 July and August.

The S&P and other US index charts do not show any clear chart pattern which enables the setting of a downside target. However the clearly visible changes in volatility behaviour, and the compression and rollover of the long term GMMA show beyond doubt that the long term uptrend has ended. The S&P chart shows how easy it is to start a trade war and how easy it is to kill a market.

Chart

Daryl Guppy is a leading international financial technical analysis expert and special consultant to Axicorp. Guppy appears regularly on CNBC Asia and is known as "The Chart Man". Disclaimer: Daryl Guppy is not a financial advisor. These notes are for educational purposes only and provide an example of applied technical analysis.

Latest comments

i think this article was relevant 11 hours ago, however President Xi Jinping speech today was a game changer
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