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March 14, 2020, 6:34 p.m. EDT

Do’s and don’ts in this stock market: Don’t panic, do develop a plan — even if you didn’t have one before

Now more than ever you must make investing and trading decisions based on probabilities

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By Nigam Arora


Getty Images/iStockphoto

The stock market is plunging.

Buying opportunities are developing, but it’s not the right time, with the exception of “nibbles” by those who meet the protection-band criteria. Please read “Stock market investors are asking ‘should I buy or sell?’ Here’s how to decide.”

Last week I warned you that a watershed moment was on the way if stocks couldn’t hold a level that I had provided. Alas, the level has not held. A bigger watershed moment is on the way if the next level doesn’t hold. Please see “A watershed moment is on the way if stocks can’t hold this level.”

Let’s explore with the help of two charts.

Two charts

Please click here for an annotated chart of the Dow Jones Industrial Average ETF /zigman2/quotes/208954582/composite DIA +2.06% , which tracks the Dow /zigman2/quotes/210598065/realtime DJIA +2.05% .

Please click here for an annotated chart of S&P 500 ETF /zigman2/quotes/209901640/composite SPY +1.33% , which represents the S&P 500 Index /zigman2/quotes/210599714/realtime SPX +1.36% . For the sake of transparency, this chart was previously published and no changes have been made.

Note the following:

• The first chart shows two support zones. The top support zone is marked “support zone.” The bottom support zone is marked “mother of support zones.”

• If the top support zone does not hold, a bigger watershed event is on its way.

• The chart shows the Arora signal to buy the inverse ETF /zigman2/quotes/202448809/composite SQQQ -1.75% or short sell the Nasdaq 100 ETF /zigman2/quotes/208575548/composite QQQ +0.45% before the big drop in the stock market.

• The second chart shows the prior support zone that has been broken.

• The second chart shows the “program selling” point where the selling accelerated. This program-selling point and the second chart were provided well in advance before this leg of the stock market drop, giving investors plenty of time to protect themselves.

• The first chart shows that RSI (relative strength index) is very oversold. This indicates that the slightest bit of good news could cause a rip-roaring rally.

• The first chart shows that volume is still not high. This indicates complacency among investors. In more practical terms, it means there is more downside to come, perhaps after a rally that fails.

/zigman2/quotes/208954582/composite
US : U.S.: NYSE Arca
$ 263.17
+5.32 +2.06%
Volume: 5.18M
June 3, 2020 4:00p
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
26,269.89
+527.24 +2.05%
Volume: 401.27M
June 3, 2020 5:18p
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/zigman2/quotes/209901640/composite
US : U.S.: NYSE Arca
$ 312.18
+4.10 +1.33%
Volume: 92.57M
June 3, 2020 4:00p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,122.87
+42.05 +1.36%
Volume: 3.16B
June 3, 2020 5:18p
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/zigman2/quotes/202448809/composite
US : U.S.: Nasdaq
$ 8.97
-0.16 -1.75%
Volume: 48.48M
June 3, 2020 4:00p
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/zigman2/quotes/208575548/composite
US : U.S.: Nasdaq
$ 236.69
+1.06 +0.45%
Volume: 37.23M
June 3, 2020 4:00p
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