Tag Archives: AAL

S&P Ended 11-Year Bull Run

Editor’s note: this column was originally published on Capital Essence’s CEM News. It’s being republished as a bonus for the loyal readers. For more information about subscribing to CEM News, please click here.


Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Friday March 13, 2020.

Global equities plummeted and the Dow plunged to its biggest-one day percentage loss since October 1987 as fears the spread of the novel coronavirus will pick up pace and usher in a global recession overshadowed the Federal Reserve’s bold new stimulus measures to calm funding markets. The Dow Jones Industrial Average tumbled nearly 10 percent to 21,200.62. The S&P plummeted 9.5 percent to 2,480.64, joining the Dow in a bear market.  The Nasdaq Composite dropped 9.4 percent to 7,201.80.  The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, soared 40 percent to close at 75.47.

Travel and airline also fell heavily as concerns over demand – as a result of the virus – were exacerbated after Donald Trump revealed a travel ban for non-citizens and non-residents from 26 European countries – excluding the U.K and Ireland – into the U.S.  Norwegian Cruise Line (NCLH) down 36% and Carnival (CCL) down 31%. American Airlines (AAL) slumped 17.7% and United Airlines (UAL) fell 25%.  As such, the iShares Transportation Average ETF (IYT) tumbled 10.61 percent on the day and is down more than 33 percent YTD, underperformed the S&P.  Now the question is what’s next?  Below is an update look at a trade in IYT.

The graphics below are from our “U.S. Market Trading Map”, show the near-term technical bias and trading ranges.  As shown, the underlying is in a short-term bullish trend when the price bars are painted in green.  The underlying is in a short-term bearish trend when the price bars are painted in red.  The yellow bars identify period of neutral or sideways trading pattern.  Additionally, the light-blue shading represents the short-term trading range.  A move above or below that range is considered overbought (as represents by the red shading) or oversold (as represents by the dark-green shading).  Readings above or below the red and green shaded areas are considered extremely overbought or extremely oversold.

Chart 1.1 – iShares Transportation Average ETF (weekly)

Our “U.S. Market Trading Map” painted IYT bars in red (sell) – see area ‘A’ in the chart. Like the rest of the market, IYT is in free fall mode after the late February selloff undercut the 4-year moving average, a key technical level based on moving averages.  This week’s selloff pushed the ETF below to the 38.2% Fibonacci retracement of the 2009-2018 upswing.  This is a bearish development, increased the probability for a test of the 50% Fibonacci retracement near 123.50.  That level is significant in charting terms. A failure to hold above it has measured move to around 103, or the 61.8% Fibonacci retracement.

IYT has resistance near 144.  Short-term traders could use that level as the logical level to measure risk against.

Chart 1.2   – S&P 500 index (weekly)

Short-term technical outlook remains bearish (sell).  Last changed March 5, 2020 from bullish (buy) – (see area ‘A’ in the chart).

[Note: for more details analysis, please take a look at our “US Market ETF Trading Map”]

The S&P plummeted 9.5 percent Thursday, joining the Dow in a bear market. The index had its worst day since “Black Monday” market crash.  As indicated in the above chart, this week’s massive selloff pushed the index below bottom of its intermediate term trading range.  A consecutive close below 2500 will bring the late 2018 low, around 2350, into view.  That level roughly corresponds with the 38.2% Fibonacci retracement of the 2009-2020 major upswing.  Below it, a more significant support lies at the 50% Fibonacci retracement, just above 2000.

On the upside, S&P has 2600 to trade against.  If the market is going to find bottom in the near term, we want to see the S&P stabilizes and climbs above 2640.  Staying below that level heralds more losses.

Short-term trading range: 2350 to 2640.  S&P has support near 2350.  A failure to hold above that level has measured move to around 2000.  The index has resistance near 2640.  A breakout above that level has measured move to around 2890.

Long-term trading range: 2000 to 3000.  S&P has support near 2260.  A failure to hold above that level has measured move to 2000.  The index has resistance near 2600.  A close above that level has measured move to 3000.

In summary, the S&P ended an 11-year bull run Thursday, down more than 20 percent from the all-time highs set just a month ago. Stocks could signal an extended downward trajectory, depending on how they close over the next few days.  If the S&P fails to close above 2640 on Friday, then the next stop will be 2350 with the possibility of a major downswing to 2000 by the end of the March.


Thanks and happy trading.

(By:Michelle Mai for Capital Essence)

© All rights reserved and actively enforced.
Note: This is a free edition of The Market Outlook, a daily CEM News subscriber newsletter. To get this column before market opens together with hundreds of technical trading ideas (including stocks and ETFs) every month, please click here.
Subscribe to CEM News to receive more in-depth research from Capital Essence.