Markets are going crazy right now as volatility increases twofold since the beginning of the year, based on the Volatility Index (VIX). Heightened volatility can be risky, but it also brings forth plenty of lucrative trading opportunities.
The featured trade idea for the day is a death-cross on the SP500. A death cross refers to when the 50-day moving average crosses below the 200-day moving average, and it has been a pretty reliable predictor for some of the biggest bear markets in the past century.
SP500 Daily Chart
From the chart, we can see that the death-cross has just been created on Monday, and prices are trading in a descending channel, with lower lows and lower highs being created consecutively.
Fundamental-wise, the markets were in a risk-off mode as the war took place. Investors pulled away from riskier assets and make the flight to safe havens, hence we see the decline in stocks markets and a rose in gold prices and the US dollar. However, markets are slowly beginning to price in the macro developments amidst ongoing negotiations between Russia and other involved parties. Oil and gold have made significant retracement where crude oil is down 24% from its recent peak at $126 to $95 while gold is down 6.76%, from $2070 to $1930, at the time of writing.
We should also not forget that there is a prospective rate hike from the Fed this Wednesday which may shake the market even further. USD should be gaining strength from the event, while gold may lose its appeal as the opportunity cost of holding gold increases.
Back to SP500, it could be a good opportunity to go long, as when everything goes back to normal, and companies begin to post positive earnings, etc, stocks should go back to their bullish track.
Technical levels for SP500
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Welf
Technical Analyst, Trader
