Lates US Job reports show the economy is recovering. Approximately 4.8 million Americans returned to work in the month of June following an increase of nearly 2.7 million in May. Nasdaq keeps passing new highs (parabolic rise). All looks so good, but there are still a lot of risks related to the virus. The number of confirmed COVID-19 is growing marginally comparing to other countries.
It seems the US stock market decoupled from the economy. People who don’t have money, can’t spend that money to keep the economy running. Even worse, they can’t pay off their credit card debt, the leased car, and the mortgaged house. And it is a real danger for the USA economy and stock market.
We have already early signs of coming selloff – clear bearish divergence on weekly and monthly time frames. Besides, Nasdaq is approaching an important Fibo level near 10500 (1.236 Fibo). Rejection from this range with significant volume can trigger pullback to 7850 or lower. The put/call option ratio shows an extreme level of greed. We could observe it every time before the selloff. The put/call options ratio has been a very good indicator of the coming trend change for the last few years. Cycles and seasonals suggest a choppy trading range for a week or two and then decline. I would like to get confirmation from the advanced decline line and On Balance Volume. With that in mind, I believe any negative fundamentals can trigger trend change and cause a sharp selloff and I will update market research subscribers accordingly.
Wishing you a great week!
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