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July 19, 2021

This Just Hit Major Support. Time To Buy The Dip?

Frank Cabibi

7/19/2021

US markets tumble nearly 2% with the dollar as investors fear the delta strain and inflation factors. COVID cases are now averaging 30,000 today in the US as 14-Day case change is up 140%. Meanwhile, bonds extend losses to 1.19%. Banks and tech stocks are getting hit hard today as money is shifting toward the bond market.

Our outlook

Further downside did come for the markets as well as the USD. Fears are high right now, and indices are selling off. Although this is very worrisome and people are afraid of another shutdown in the US, the circumstances are different from last year.

For one, we now have vaccines. About 50% of the US is vaccinated while Americans continue to flood the job market. Vaccines aren't going to guarantee that you won't get sick, but the antibodies your body builds up with the vaccine should help offset a lot of the illness or even prevent it entirely.

Secondly, many businesses changed their working model to accommodate the stay-at-home lifestyle that was pushed on citizens nationwide. So, unlike last year, we already have the necessities prepared for another shutdown where layoffs may be lessened and economic productivity doesn't have to come to a screeching halt. This also could mean that tech stocks will be the first sector investors look to during economic fears.

Trade Setups

SPX500

Here is the SPX500 in the 1D chart which is down 1.47% at the time of writing this. Price has come down all the way to major support on its 50-day moving average which is showing some positive momentum after that bounce. If price can maintain above the moving average today, it could suggest that investors are ready to go long again.

NAS100

Massive buying in the tech sector on this latest 4H candle as price action shows big rejection from the low with a candle hammer formation. Further support is at its 200 SMA on this timeframe for mild support. Price is not testing newly formed resistance now as it made a lower low.

IWM

The Russel 2000 ETF that tracks growth stocks came down to a multi-month bottom before bouncing right back this morning. Price also got real close to its 200 DMA on the 1D timeframe which could serve as support if price comes back down. However, this looks like the bounce is already happening.

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