SPX and the Covid Death Numbers
Updated
Technical introduction
I don't know who is going to read this so I am going to be a bit more detailed than normal to explain some of this indicators.
The moving average convergence/divergence indicator, also known as the 'Mac D" defaul calculations is to that the differnce between the 12 period Exponential Moving Average (EMA) and subtract the 26 period EMA. So if the MACD reads 5 then the 12 EMA is 5 units above the 26. That doens't mean alot of the difference is between 100 and 105 but it does mean a lot if the difference is between a 1 and a 6. Likewise if you have a negative number it means the 12 EMA is below the 12 EMA, a sign price is decreasing
The average of the MACD is called the signal line and the default is set to a 9 period look back So when the MACD is above the signal line the change in momentum is positive for nine periods and when it is below 0 the change in momentum is negative, and when the reading is zero the change in momentum is flat. If you minus the MACD from the signal line you get the MACD Histogram. You can use both the MACD proper, the signal line, or the Histogram to look for divergences. Time for the Divergence primer:
Normal Divergence (Trend Reversal)
Bearish: Higher highs on price action but lower highs on the indicator
Bullish: Lower lows on price action but higher lows on the indicator
Hidden (Trend Continuation)
Bearish: Lower high on the price action and higher highs on the indicator
Bullish: Higher low on the price action and a lower low on the indicator
COVID Analysis
Beginning with the Covid Death Numbers on the right
The death count can only go up but the MACD and histogram can give us some idea how the momentum can change. When the 12 and 26 EMAs are furthest apart the MACD has its highest score, which we see happens around May 9th. When the MACD and Signal line cross its a sign that the rate of change has been roughly constant for 12 to 26 periods. As the MACD dips below the signal line it means the rate of reported deaths is decreasing. Deaths are still going up, but the rate is decreasing.
At our current date we see the MACD looks very close to crossing the signal line. That means that death rate is going to be increasing. And because there is so much averaging going on between the 12, and 26 EMAs and the signal smoothing for 9 periods we know this change in rate isn't random fluctuation.
In other words, a stained MACD Signal Cross predicts or suggest the reported number of COVID deaths is going to pop. Probably in a big way. If we start to see the MACD histogram rounding off positive we can get some sort of idea if there is going to be some divergences and what that means for the death rate.
SPX Technical Analysis
The divergence primer tells us that a lower high on price action but a higher high on a indicator is Hidden Bearish Divergence. This suggest strongly that the trend is a continuation of a downtrend. Both the MACD and the Histogram are showing this Hidden bearish divergence. The orange chart formation is a rising wedge positioned as a bull trap. The blue line shows where previous support at the years open turned into resistance at the top of my proposed bear trap.
The MACD appears to be finding something resembling support on the Signal Line. This means that there has been some considerable sideways action. Sideways action ultimately has to pick a direction and the hidden bearish divergence suggest it will be to the downside. All of this is on a 3d intra week chart.
Fundamental Analysis
An increase in the rate of COVID death numbers may behoove a government response and/or a change in optimism in traders and investors. We can see the hot spotes a shifting in the US away from the Easter Seaboard down the Gulf of Mexico and elsewhere. Mass human psychology means there were always going to be another wave, if not a third. How to adapt to that broadly isn't the question here, it is what one should do financially.
I am not a financial advisor, and i am not your financial advisor even if I was one. I am taking a short position against SPX.
npr.org/sections/health-shots/2020/03/16/816707182/map-tracking-the-spread-of-the-coronavirus-in-the-u-s
I don't know who is going to read this so I am going to be a bit more detailed than normal to explain some of this indicators.
The moving average convergence/divergence indicator, also known as the 'Mac D" defaul calculations is to that the differnce between the 12 period Exponential Moving Average (EMA) and subtract the 26 period EMA. So if the MACD reads 5 then the 12 EMA is 5 units above the 26. That doens't mean alot of the difference is between 100 and 105 but it does mean a lot if the difference is between a 1 and a 6. Likewise if you have a negative number it means the 12 EMA is below the 12 EMA, a sign price is decreasing
The average of the MACD is called the signal line and the default is set to a 9 period look back So when the MACD is above the signal line the change in momentum is positive for nine periods and when it is below 0 the change in momentum is negative, and when the reading is zero the change in momentum is flat. If you minus the MACD from the signal line you get the MACD Histogram. You can use both the MACD proper, the signal line, or the Histogram to look for divergences. Time for the Divergence primer:
Normal Divergence (Trend Reversal)
Bearish: Higher highs on price action but lower highs on the indicator
Bullish: Lower lows on price action but higher lows on the indicator
Hidden (Trend Continuation)
Bearish: Lower high on the price action and higher highs on the indicator
Bullish: Higher low on the price action and a lower low on the indicator
COVID Analysis
Beginning with the Covid Death Numbers on the right
The death count can only go up but the MACD and histogram can give us some idea how the momentum can change. When the 12 and 26 EMAs are furthest apart the MACD has its highest score, which we see happens around May 9th. When the MACD and Signal line cross its a sign that the rate of change has been roughly constant for 12 to 26 periods. As the MACD dips below the signal line it means the rate of reported deaths is decreasing. Deaths are still going up, but the rate is decreasing.
At our current date we see the MACD looks very close to crossing the signal line. That means that death rate is going to be increasing. And because there is so much averaging going on between the 12, and 26 EMAs and the signal smoothing for 9 periods we know this change in rate isn't random fluctuation.
In other words, a stained MACD Signal Cross predicts or suggest the reported number of COVID deaths is going to pop. Probably in a big way. If we start to see the MACD histogram rounding off positive we can get some sort of idea if there is going to be some divergences and what that means for the death rate.
SPX Technical Analysis
The divergence primer tells us that a lower high on price action but a higher high on a indicator is Hidden Bearish Divergence. This suggest strongly that the trend is a continuation of a downtrend. Both the MACD and the Histogram are showing this Hidden bearish divergence. The orange chart formation is a rising wedge positioned as a bull trap. The blue line shows where previous support at the years open turned into resistance at the top of my proposed bear trap.
The MACD appears to be finding something resembling support on the Signal Line. This means that there has been some considerable sideways action. Sideways action ultimately has to pick a direction and the hidden bearish divergence suggest it will be to the downside. All of this is on a 3d intra week chart.
Fundamental Analysis
An increase in the rate of COVID death numbers may behoove a government response and/or a change in optimism in traders and investors. We can see the hot spotes a shifting in the US away from the Easter Seaboard down the Gulf of Mexico and elsewhere. Mass human psychology means there were always going to be another wave, if not a third. How to adapt to that broadly isn't the question here, it is what one should do financially.
I am not a financial advisor, and i am not your financial advisor even if I was one. I am taking a short position against SPX.
npr.org/sections/health-shots/2020/03/16/816707182/map-tracking-the-spread-of-the-coronavirus-in-the-u-s
Note
Because they have been in the news here is a look at the Texas Death graphNote
The Florida death graphand the Arizona death chart
Of course each one looks different but the Arizona chart is the most aggressive of the two with no clear bearish cross of the MACD signal line which will bear some watching. Florida and Texas look simular, but with the timing being off. But those charts give us some idea how the number for US total will change
Finally below, a small state in regards to population and budget, Alaska. They appear to be only publishing their numbers on a ad hoc basis and so there is a leap frogging MACD
Note
How marvelous, the TD Sequential just printed a 9 at the top of the bollinger band on SPY. My falling purple resistance line was breached and we quickly moved up to open of 2020. SPXUSD and SPY are not perfectly correlated, but the come pretty close. This is in addition to the fundamental problems in the world. 9's don't 100% predict reversal but this is a bad spot for bears to be. I'll be back in a couple of days to look at the MACD cross development on Deaths_US.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.