“Surprise” Rate Cut is Met With a Wave of Selling; Major Markets Fall by More Than 2% - Chaikin Analytics

“Surprise” Rate Cut is Met With a Wave of Selling; Major Markets Fall by More Than 2%

The SPDR S&P 500 ETF (SPY) has a Neutral Chaikin Power Gauge ETF Rating but continues to outperform the broader IWV (Russell 3000 ETF). The fund is oversold based on our indicator and Chaikin Money Flow is bearish following last week’s selloff which took place on heavy volume. SPY is below the declining long-term trend line and has a bearish Power Bar Ratio.   

Near-term support is in the $290 – $300 range while resistance in the $310 – $320 range held yesterday.   

The iShares Russell 2000 ETF (IWM) has a Neutral Chaikin Power Gauge ETF rating and continues to underperform the SPY, with its relative weakness intensifying as the market sells off. Our OB / OS Indicator is in an oversold position and Chaikin Money Flow is bearish. IWM is below the declining long-term trend line and has fallen back into the consolidation zone that marked trading for much of 2019.  The Power Bar Ratio is bearish.

Support is at the bottom of the 2019 range near $145 while resistance is in the area between $155 and $160.

The Invesco QQQ ETF (QQQ) has a Bullish Chaikin Power Gauge ETF Rating and is leading the SPY as it has been doing since October (in this case, leadership means down less). The fund is oversold based on our indicator and Chaikin Money Flow is bearish. QQQ failed at the long-term trend line yesterday and has support in the $195 to $200 range.  

 

Take-Away: All three of the major market ETFs that we track are currently oversold with bearish money flow. All have bearish Power Bar Ratios and all are trading below their long-term trend lines. We have written that the odds of a retest of the lows remained high and, while this is not an exact science, we note that on a closing basis, all three funds are less than 2% from Friday’s closing prices. 

The “surprise” rate cut by the Fed yesterday was met with a wave of selling which tells us one of two things. Either, it was not a surprise at all or investors do not feel that it will be all that helpful in spurring the economy from a slowdown caused by a virus that is spreading globally.  

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