Since the massive drops in all of the US markets this week, it makes me think if this is a start of a new macro trend (a.k.a correction/recession). So I zoomed out to the weekly chart on the S&P 500 to see a little of what is going on.
Using DeMark counting indicators, (which are used to measure trend exhaustion) you can see below that the green 1-2-3 count in the last 3 weeks was interrupted by this week's candle. Since there is still today and tomorrow for a possible strong bounce, here is what I am looking for:
If this week's candle closes above $3225.53 (which is the close of the candle with the red 1, four weeks ago), then the green DeMark sell countdown count from the past 3 weeks will continue. Now in order to close above this level the S&P would need a strong 6% bounce in the next 48 hours. Now I know that is a tall order but I can't completely rule it out since volatility this week has been very high (based on the VIX doubling since last week).
If the S&P 500 doesn't close above the $3225.53 level, then I have enough reason to suspect that this is the start of a new macro trend like a correction, or even a recession. I am personally leaning towards a recession because of the yield curve inversion that took place in August of 2019. That single indicator has predicted the past 7 recessions. This chart is the current yield curve and you can see that ~1 year after a yield curve inversion, a US recession has "officially" started. Maybe the fears surrounding COVID-19 is a catalyst for an imminent US recession. I will definitely be watching the market closely to better my analysis.
If you liked my analysis and want more updates, go follow me on Twitter here: https://twitter.com/jamiedubauskas
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