Crucial days ahead

May 1, 2020

One of the best months in decades came to an end. the combination of stimulus plans, country reopening and a few successful medical trials fueled the recent rally. I call it "The hope rally ": we hope that the fed will keep printing money to support the economy, we hope that we will go back to work in a few days and the virus situation will not gonna get out of control and we hope for a medicine that can put this terrible story behind us. Now, hopes alone can't keep the bulls in-game for much longer. With more than 30mil people unemployed and the US economy that shrank 4.8% in the first quarter of this year ( the fastest pace since the last recession ), the chances of falling into a deep recession are growing daily. Let's have a look at the chart:

This time I chose the s&p500 daily.

- Trading inside a "RISING WEDGE " pattern ( usually its a reversal sign )
- Found resistance around 2950 where we can see the 61.8 fibo retracements from the last decline and the 233 ema.
- stochastic : bearish divergence
- obv : showing that the bulls are losing momentum.

BEAR CASE:

wedge breakout will probably lead to a massive move towards the last lows ( its around 25% decline from the current levels )

Bull case :

a daily close above fibo levels and 2950 can trigger a nice move towards the last hights of the index. we will look for a potential double top formation or a new high.

NEUTRAL CASE:

the index can trade in range inside the rising wedge until breakout ( most likely bearish )

please be careful out there:)