Get your bottom fishing hooks ready – according to the probabilities

Get your bottom fishing hooks ready – according to the probabilities

den 9 mars 2020 författare Carlsquare

Correctly reported by the Chinese authorities or not, with the data at hand provided by Johns Hopkins, one can see how number of new Corona-cases in mainland China has been and continues to flatten out:

The Chinese state is also more or less trying to force people back to their workplaces. But the interest of going back from the Chinese people to get back to work seems weak. In an article from Caixinglobal.com, one can learn how workers leave the lights in the factories on just to make it look like people are working there.

However, the demand for energy is likely to be the best parameter to show when China is seriously starting to produce again. Below shows how daily coal consumption at six major Chinese power firms is lagging previous years:

The United States has not yet been hit as hard as many other countries by the Corona virus. Figures for unemployment in the United States came in at a strong 273,000 new jobs on Friday 6 March, compared to expected 170,000. The graph below shows the strong correlation between jobs created in the US economy and the development for the S&P 500 index. However, the stock exchange did not take this into account and fell in concern about the Corona virus last Friday 6 March:

We cannot help to notice a phenomenon that is extremely unusual. It historically only seems to have occurred once before: This is that many indexes and individual stocks fall not just below two standard deviations, but by three.

The Bollinger bands were created by John Bollinger to manage positions in active trading. He set bands based on two standard deviations from a 20-day moving average. The vast majority of outcome are captured within two standard deviations (about 95 percent). If it goes beyond two standard deviations, it means that something is extremely oversold or overbought. In other words, this is something you should trade against… so called mean revision.

But what has happened lately is that the market has been trading with three standard deviations, that is, and outlier with 0.27 percent probability according to the normal distribution curve.

Below is the S&P 500 index graph. In the green fields we have set the Bollinger bands to two standard deviations. Note that the index often trends nicely with these lines. The gray bands are set on three standard deviations. Note how this has constituted the levels that have been supported in the case:

In this case, one may start to consider whether it is a good idea to buy the dip, since you really have the odds on your side. Also, we could start to see the share of a double bottom formation.

Bull & Bear-certifikat

 Symbol ISINUnderliggande referensvärdeHävstångTypVal.KöpSälj 
BULL APPLE X10 VON1
DE000VF533C5 Apple Inc. 10,00 Long SEK 0,002
BULL APPLE X10 VON10
DE000VP2RC04 Apple Inc. 10,00 Long SEK 0,048 0,052
BULL APPLE X10 VON11
DE000VP3MTV0 Apple Inc. 10,00 Long SEK 0,038 0,042
BULL APPLE X10 VON12
DE000VP3NQ50 Apple Inc. 10,00 Long SEK 0,018 0,022
BULL APPLE X10 VON15
DE000VP9V6U9 Apple Inc. 10,00 Long SEK 0,10 0,104
BULL APPLE X10 VON14
DE000VP9VHN0 Apple Inc. 10,00 Long SEK 0,202 0,206
BULL APPLE X10 VON18
DE000VV11SJ7 Apple Inc. 10,00 Long SEK 0,822 0,83
BULL APPLE X10 VON19
DE000VV19AU5 Apple Inc. 10,00 Long SEK 2,18 2,20
BULL APPLE X10 VON20
DE000VV2K3W0 Apple Inc. 10,00 Long SEK 6,31 6,36
BULL APPLE X10 VON21
DE000VV3R221 Apple Inc. 10,00 Long SEK 15,13 15,25
BULL APPLE X10 VON22
DE000VV67GW7 Apple Inc. 10,00 Long SEK 44,23 44,56
BULL APPLE X10 VON23
DE000VV8Z9Y0 Apple Inc. 10,00 Long SEK 102,24 103,00
BULL APPLE X10 VON17
DE000VX8WXW8 Apple Inc. 10,00 Long SEK 0,41 0,414
BULL WTI X10 VON53
DE000VV34D70 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,048 0,05
BULL WTI X10 VON46
DE000VX5RHK2 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,001
BULL WTI X10 VON48
DE000VX8XQQ2 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,004
BULL WTI X10 VON49
DE000VX8ZH15 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,002
BULL WTI X10 VON52
DE000VX94FH0 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,026 0,028
BULL WTI X10 VON51
DE000VX9K3V1 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,012 0,02
BULL WTI X10 VON50
DE000VX9KN39 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,014 0,02

The same three standard deviation applies for EUR/USD:

But everything is a matter of timing. One may argue that the normal distribution since long is known not to be applicable to the stock market. Instead one should add the fat tails to the distribution curve.

Anyway, the market is anything but calm. The Fed lowered its interest rate by 0.5 percentage points a week or so ago, which was followed by support from the IMF. If you look at the Fed's balance sheet, you can see that it is growing again. Thus, the Fed is back in and buying:

The graph above shows the S&P 500 index in red and Fed's growing balance sheet in blue.

But the market is expecting further rate cuts from the Fed already by March 18. Once again, the Fed has been out of step with developments. The only thing that can be done now from the Fed is to slow down and wait for an improved timing.

Buying support from the Fed and expectations of further rate cuts is all bullish news for the stock market. But Nasdaq also fell during Friday´s trading though managed to bounce upwards on support. The next level to be broken on the upside is Fib 50 and MA100:

Bull & Bear-certifikat

 Symbol ISINUnderliggande referensvärdeHävstångTypVal.KöpSälj 
BULL APPLE X10 VON1
DE000VF533C5 Apple Inc. 10,00 Long SEK 0,002
BULL APPLE X10 VON10
DE000VP2RC04 Apple Inc. 10,00 Long SEK 0,048 0,052
BULL APPLE X10 VON11
DE000VP3MTV0 Apple Inc. 10,00 Long SEK 0,038 0,042
BULL APPLE X10 VON12
DE000VP3NQ50 Apple Inc. 10,00 Long SEK 0,018 0,022
BULL APPLE X10 VON15
DE000VP9V6U9 Apple Inc. 10,00 Long SEK 0,10 0,104
BULL APPLE X10 VON14
DE000VP9VHN0 Apple Inc. 10,00 Long SEK 0,202 0,206
BULL APPLE X10 VON18
DE000VV11SJ7 Apple Inc. 10,00 Long SEK 0,822 0,83
BULL APPLE X10 VON19
DE000VV19AU5 Apple Inc. 10,00 Long SEK 2,18 2,20
BULL APPLE X10 VON20
DE000VV2K3W0 Apple Inc. 10,00 Long SEK 6,31 6,36
BULL APPLE X10 VON21
DE000VV3R221 Apple Inc. 10,00 Long SEK 15,13 15,25
BULL APPLE X10 VON22
DE000VV67GW7 Apple Inc. 10,00 Long SEK 44,23 44,56
BULL APPLE X10 VON23
DE000VV8Z9Y0 Apple Inc. 10,00 Long SEK 102,24 103,00
BULL APPLE X10 VON17
DE000VX8WXW8 Apple Inc. 10,00 Long SEK 0,41 0,414
BULL WTI X10 VON53
DE000VV34D70 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,048 0,05
BULL WTI X10 VON46
DE000VX5RHK2 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,001
BULL WTI X10 VON48
DE000VX8XQQ2 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,004
BULL WTI X10 VON49
DE000VX8ZH15 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,002
BULL WTI X10 VON52
DE000VX94FH0 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,026 0,028
BULL WTI X10 VON51
DE000VX9K3V1 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,012 0,02
BULL WTI X10 VON50
DE000VX9KN39 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,014 0,02

The OMXS30 index reached a new local bottom formation on Friday 6 March in the wake of the Corona virus:

Support on the downside is found at 1 620 followed by 1 575.

Bull & Bear-certifikat

 Symbol ISINUnderliggande referensvärdeHävstångTypVal.KöpSälj 
BULL APPLE X10 VON1
DE000VF533C5 Apple Inc. 10,00 Long SEK 0,002
BULL APPLE X10 VON10
DE000VP2RC04 Apple Inc. 10,00 Long SEK 0,048 0,052
BULL APPLE X10 VON11
DE000VP3MTV0 Apple Inc. 10,00 Long SEK 0,038 0,042
BULL APPLE X10 VON12
DE000VP3NQ50 Apple Inc. 10,00 Long SEK 0,018 0,022
BULL APPLE X10 VON15
DE000VP9V6U9 Apple Inc. 10,00 Long SEK 0,10 0,104
BULL APPLE X10 VON14
DE000VP9VHN0 Apple Inc. 10,00 Long SEK 0,202 0,206
BULL APPLE X10 VON18
DE000VV11SJ7 Apple Inc. 10,00 Long SEK 0,822 0,83
BULL APPLE X10 VON19
DE000VV19AU5 Apple Inc. 10,00 Long SEK 2,18 2,20
BULL APPLE X10 VON20
DE000VV2K3W0 Apple Inc. 10,00 Long SEK 6,31 6,36
BULL APPLE X10 VON21
DE000VV3R221 Apple Inc. 10,00 Long SEK 15,13 15,25
BULL APPLE X10 VON22
DE000VV67GW7 Apple Inc. 10,00 Long SEK 44,23 44,56
BULL APPLE X10 VON23
DE000VV8Z9Y0 Apple Inc. 10,00 Long SEK 102,24 103,00
BULL APPLE X10 VON17
DE000VX8WXW8 Apple Inc. 10,00 Long SEK 0,41 0,414
BULL WTI X10 VON53
DE000VV34D70 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,048 0,05
BULL WTI X10 VON46
DE000VX5RHK2 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,001
BULL WTI X10 VON48
DE000VX8XQQ2 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,004
BULL WTI X10 VON49
DE000VX8ZH15 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,002
BULL WTI X10 VON52
DE000VX94FH0 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,026 0,028
BULL WTI X10 VON51
DE000VX9K3V1 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,012 0,02
BULL WTI X10 VON50
DE000VX9KN39 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,014 0,02

The DAX index is getting close to the bottom from August 2019 and no sign of a double bottom formation can be found here:

Bull & Bear-certifikat

 Symbol ISINUnderliggande referensvärdeHävstångTypVal.KöpSälj 
BULL APPLE X10 VON1
DE000VF533C5 Apple Inc. 10,00 Long SEK 0,002
BULL APPLE X10 VON10
DE000VP2RC04 Apple Inc. 10,00 Long SEK 0,048 0,052
BULL APPLE X10 VON11
DE000VP3MTV0 Apple Inc. 10,00 Long SEK 0,038 0,042
BULL APPLE X10 VON12
DE000VP3NQ50 Apple Inc. 10,00 Long SEK 0,018 0,022
BULL APPLE X10 VON15
DE000VP9V6U9 Apple Inc. 10,00 Long SEK 0,10 0,104
BULL APPLE X10 VON14
DE000VP9VHN0 Apple Inc. 10,00 Long SEK 0,202 0,206
BULL APPLE X10 VON18
DE000VV11SJ7 Apple Inc. 10,00 Long SEK 0,822 0,83
BULL APPLE X10 VON19
DE000VV19AU5 Apple Inc. 10,00 Long SEK 2,18 2,20
BULL APPLE X10 VON20
DE000VV2K3W0 Apple Inc. 10,00 Long SEK 6,31 6,36
BULL APPLE X10 VON21
DE000VV3R221 Apple Inc. 10,00 Long SEK 15,13 15,25
BULL APPLE X10 VON22
DE000VV67GW7 Apple Inc. 10,00 Long SEK 44,23 44,56
BULL APPLE X10 VON23
DE000VV8Z9Y0 Apple Inc. 10,00 Long SEK 102,24 103,00
BULL APPLE X10 VON17
DE000VX8WXW8 Apple Inc. 10,00 Long SEK 0,41 0,414
BULL WTI X10 VON53
DE000VV34D70 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,048 0,05
BULL WTI X10 VON46
DE000VX5RHK2 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,001
BULL WTI X10 VON48
DE000VX8XQQ2 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,004
BULL WTI X10 VON49
DE000VX8ZH15 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,002
BULL WTI X10 VON52
DE000VX94FH0 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,026 0,028
BULL WTI X10 VON51
DE000VX9K3V1 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,012 0,02
BULL WTI X10 VON50
DE000VX9KN39 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,014 0,02

The Gold price has managed to gain momentum after the first round of margin calls. Worries of the global economic outlook as well as a weaker USD is fueling the metal.

Note how the psychologically important level of 1 700 is approaching. Last time the gold price was above that level was in 2012.

Bull & Bear-certifikat

 Symbol ISINUnderliggande referensvärdeHävstångTypVal.KöpSälj 
BULL APPLE X10 VON1
DE000VF533C5 Apple Inc. 10,00 Long SEK 0,002
BULL APPLE X10 VON10
DE000VP2RC04 Apple Inc. 10,00 Long SEK 0,048 0,052
BULL APPLE X10 VON11
DE000VP3MTV0 Apple Inc. 10,00 Long SEK 0,038 0,042
BULL APPLE X10 VON12
DE000VP3NQ50 Apple Inc. 10,00 Long SEK 0,018 0,022
BULL APPLE X10 VON15
DE000VP9V6U9 Apple Inc. 10,00 Long SEK 0,10 0,104
BULL APPLE X10 VON14
DE000VP9VHN0 Apple Inc. 10,00 Long SEK 0,202 0,206
BULL APPLE X10 VON18
DE000VV11SJ7 Apple Inc. 10,00 Long SEK 0,822 0,83
BULL APPLE X10 VON19
DE000VV19AU5 Apple Inc. 10,00 Long SEK 2,18 2,20
BULL APPLE X10 VON20
DE000VV2K3W0 Apple Inc. 10,00 Long SEK 6,31 6,36
BULL APPLE X10 VON21
DE000VV3R221 Apple Inc. 10,00 Long SEK 15,13 15,25
BULL APPLE X10 VON22
DE000VV67GW7 Apple Inc. 10,00 Long SEK 44,23 44,56
BULL APPLE X10 VON23
DE000VV8Z9Y0 Apple Inc. 10,00 Long SEK 102,24 103,00
BULL APPLE X10 VON17
DE000VX8WXW8 Apple Inc. 10,00 Long SEK 0,41 0,414
BULL WTI X10 VON53
DE000VV34D70 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,048 0,05
BULL WTI X10 VON46
DE000VX5RHK2 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,001
BULL WTI X10 VON48
DE000VX8XQQ2 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,004
BULL WTI X10 VON49
DE000VX8ZH15 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,002
BULL WTI X10 VON52
DE000VX94FH0 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,026 0,028
BULL WTI X10 VON51
DE000VX9K3V1 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,012 0,02
BULL WTI X10 VON50
DE000VX9KN39 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,014 0,02

Below shows the Boliden share along with copper. There is absolutely a correlation between these two. As can be seen both copper and Boliden are trading close to their support levels. In case of a break in copper, it is not unlikely that Boliden will follow.

In order to find the next level on the downside, one should go back to 2015 to identify the SEK 165-level.

Bull & Bear-certifikat

 Symbol ISINUnderliggande referensvärdeHävstångTypVal.KöpSälj 
BULL APPLE X10 VON1
DE000VF533C5 Apple Inc. 10,00 Long SEK 0,002
BULL APPLE X10 VON10
DE000VP2RC04 Apple Inc. 10,00 Long SEK 0,048 0,052
BULL APPLE X10 VON11
DE000VP3MTV0 Apple Inc. 10,00 Long SEK 0,038 0,042
BULL APPLE X10 VON12
DE000VP3NQ50 Apple Inc. 10,00 Long SEK 0,018 0,022
BULL APPLE X10 VON15
DE000VP9V6U9 Apple Inc. 10,00 Long SEK 0,10 0,104
BULL APPLE X10 VON14
DE000VP9VHN0 Apple Inc. 10,00 Long SEK 0,202 0,206
BULL APPLE X10 VON18
DE000VV11SJ7 Apple Inc. 10,00 Long SEK 0,822 0,83
BULL APPLE X10 VON19
DE000VV19AU5 Apple Inc. 10,00 Long SEK 2,18 2,20
BULL APPLE X10 VON20
DE000VV2K3W0 Apple Inc. 10,00 Long SEK 6,31 6,36
BULL APPLE X10 VON21
DE000VV3R221 Apple Inc. 10,00 Long SEK 15,13 15,25
BULL APPLE X10 VON22
DE000VV67GW7 Apple Inc. 10,00 Long SEK 44,23 44,56
BULL APPLE X10 VON23
DE000VV8Z9Y0 Apple Inc. 10,00 Long SEK 102,24 103,00
BULL APPLE X10 VON17
DE000VX8WXW8 Apple Inc. 10,00 Long SEK 0,41 0,414
BULL WTI X10 VON53
DE000VV34D70 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,048 0,05
BULL WTI X10 VON46
DE000VX5RHK2 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,001
BULL WTI X10 VON48
DE000VX8XQQ2 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,004
BULL WTI X10 VON49
DE000VX8ZH15 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,002
BULL WTI X10 VON52
DE000VX94FH0 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,026 0,028
BULL WTI X10 VON51
DE000VX9K3V1 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,012 0,02
BULL WTI X10 VON50
DE000VX9KN39 WTI Light Sweet Crude Oil Future Jan 2023 10,00 Long SEK 0,014 0,02

Looking at bitcoin, one could ask whether it is a scary head and shoulder-pattern that we see. The neckline does serve as a pretty strong support, also made up by MA100 and Fib 50. But a break below and the patterns call for further downside to the 6 840-level: