Stock Market Update and Charts by Nick Radge 13 May 2022

It’s time for a stock market update by Nick Radge given the turbulent week we have had. In Australia, we have an election in a week’s time. Around the world we have the war in Ukraine, supply chain issues due to Covid 19 lockdowns in China and escalating inflation figures (including in Australia).

Let’s see how the stock market, and the charts, are reacting.

Transcript from Video

There’s a lot going on in the markets at the moment. So I thought we’d take a look at a few random charts of interest. We’ll look at the weekly time frames to view that larger picture.

We’ll start with the Australian market, which you can see here in front of you at the moment, and then we’ll move to the US markets and then some individual names as well. So you can see Australia, in the scheme of things, is actually holding up reasonably well. We’ve been consolidating for about the last year or so. You can see sideways there. We are testing the lower end of this range.

We do have the US markets already dropping out of that. So one would expect that potentially, Australia will do so, but it is holding up for the moment. The other important thing, and I’ve annotated on the chart there. Specifically right here, we’ve got some buy demand coming in at that lower side. So we’ve got a big thrust down, back up and a close about midway up the bar. We did see that in some of the US markets, but it has since broken down. So those buys have now moved away for the moment and we’ll just see what happens there. So that’s the Australian market.

In terms of the US market, let’s go and have a look at the S&P 500, and you can see there, we’re making a series of lower lows and lower highs on the weekly timeframe. Again, those buyers I was talking about, you can see them back here, but we’ve pushed down through that support level now. So we will most likely see quite a bit of resistance on the way back up, If we do have some kind of a bounce, and then potentially we’re going to start heading lower. Confidence will only really come back if we break up through these recent highs up here. But at the moment, there’s a lot of overhead resistance.

Our 30-week moving average is starting to trend down. So there’s a lot of work to be done in order for this market to start recovering and start looking healthy again. So caution remains there.

The NASDAQ composite. Potentially, we’ve got a head and shoulders pattern there. You can see that a lot more technical damage is done. We’ve fallen through that support level that sits around the 12 1/2 thousand. If we are to really take a look at these classical chart patterns, specifically this head and shoulders, then potentially, we can see or expect a downside target way back down here around that 8 1/2 thousand. So again, series of higher lows and lower highs, looks pretty bearish, measured move down to that level down there. But just watch out for those bear market rallies. They can be pretty nasty when they come along and will suck a lot of people in. So trend firmly down there in the NASDAQ.

Let’s take a look at the small cap Russell 2000, and you can see here they’re clearly breaking down. It’s come back to an important level through here around this 1750 that extends all the way back to the July, 2018 highs, also the pre COVID crash highs. So it should provide a little bit of support, but as you can see, again, there’s a lot of overhead resistance here and I would expect that a lot of work needs to be done before this starts looking healthier again. I probably wouldn’t have any confidence until we broke back up through that kind of level there, which sits at around the 2200. So a lot of work to be done in a small cap space, but again, clearly a bear market in play.

Again, be very, very cautious of any short-term short-covering rallies. Now, let’s take a look at some of the key stocks out there. Actually let’s look at the VIX first, volatility index. Interesting here. There’s not a great deal of panic going on. This is the weekly version. So you can see for all intents where it’s just tracking more or less as we have for the last year or so. We haven’t had the big panic spike that what we had in 2020 as yet. So that’s pretty interesting to consider what we’re doing now is really nothing different to what we’ve done in the last year or so.

So that’s the VIX index. It doesn’t look like it’s going to break out. We’ve had a few weak closes there, but we’ll see what happens over the next month or so when, if this bear market does start to really get some steam up.

Let’s take a look at some individual names now. I guess Amazon is a stalwart and has been the leader of this bull market for quite some time. I posted this on Twitter yesterday and you can see a Weinstein stage analysis there and perfect stage analysis, and we’re broken down and we’re all the way back to those 2020 highs again. So again, another stop, a lot of overhead resistance, a lot of technical damage has been done. It’s going to take a lot of work for this to turn around and start looking healthy again. I would probably only get confident if we build some kind of a base in this region down here and then look for breakout.

Otherwise, any very swift turnaround, which seems highly unlikely, only once we get up through that 3 1/2 thousand dollar level again. So best case scenario, I think realistically, is some kind of base building that will take a considerable period of time to form. Then potentially we can start to look again at some kind of bullish formation. But for the moment, one to steer clear of.

I have been holding Amazon for a long, long, long time, 10 years, eight years, something like that, and I recently exited when we broke down through that $3,000 mark.

Microsoft is another one that I did have, had been holding and recently exited. You can see it’s just starting to break down. It has been the stalwart and it’s now broken down. So that’s looking particularly ugly there as well and plenty of downside potential there with a lot of overhead that’s going to keep it down.

Another one is Apple, which again, I’ve held for quite a number of years and have recently exited on that break of down through 160, and again, same kind of situation, nice Stan Weinstein stage analysis there.

We’ve moved into stage four, which is the bear market stage. You can see we’ve got a bit of support coming through that extends back to this area here. So we’re just testing on that now. There’s a bit going on there at the moment, these old highs through here and this low through here. We might get some kind of a bounce. 30-week moving average hasn’t rolled over just yet, but certainly below the resistance levels now or through those support levels and coming into bearish territory. So it’ll be interesting to see if that trend accelerates to the downside in the near term.

Let’s have a look at Bitcoin. I have nothing to do with Bitcoin. I’ve never traded it myself. A lot of technical damage being done there. I think a few people have lost a fair amount of money recently in Bitcoin, but it too has broken quite a significant level of support. It might recover a little bit, have a bit of a bounce potentially, but for all intensive purposes, that trend is now down. I wouldn’t be getting overly keen unless we started to break back up through that 50,000 level, or if we started to have some kind of broad consolidation.

At this stage, just watch for short-covering rallies, that volatility will continue to accelerate. So you might get some kind of a sharp rally, but I wouldn’t get sucked into that just yet. Look for those strong technical points, specifically, these kind of basing patterns is what you want to see, and that certainly is not in play at the moment.

There’s a few markets of interest, certainly intriguing times, a little bit difficult. Certainly my portfolios this year are struggling a little, but this was very much the similar situation as what we saw in 2020. I think in June, 2020, I was down about 8% and finished with a record year in the back half of that year.

I’m not suggesting in any way, shape, or form that’s going to occur this time around. We certainly don’t expect to have that federal reserve or central bank pumping that we had back then. In fact, everything’s a little bit different on the central bank front at the moment with interest rates moving higher.

I would suggest that the only support we would get for equities at this stage is a complete reversal reform by the fed, and that doesn’t seem to be on the offering at this stage. Anyway, so a lot going on; take care, trade carefully and we’ll keep you in touch.