U.S. Stock Market - Short Squeeze Immediately Ahead!

The March 13th sell signal in most major U.S. Stock Market indices that was triggered in my computer trading system was fortuitous, to say the least (see previous posting from the evening of March 13th). 

S&P 500 Index with 200-Day Moving Average Line

However, despite this past Friday's steep losses, it looks to me like downside momentum is waning and that a significant short squeeze may be about to unfold. 

How can the stock market rally in the face of negative news such as President Trump's threat to impose $100 billion of new tariffs on China or Federal Reserve Chairman Powell's pledge to continue to raise interest rates? And let's not ignore the bearish increasing probability that the Republican Party will lose both Houses of Congress in the upcoming November 2018 elections! 

Quite frankly, I can't explain why the average U.S. stock price is only down about 10% since the late January 2018 record high. Given the current news climate (Trump's trade war!) and the hawkish apparent path of Federal Reserve monetary policy, I would have thought that U.S. stock prices would have corrected at least 20% from record highs by now. While I am confident that the current bear market will eventually see a correction of at least 20%, right now I see the increasing potential for counter-trend rally (short squeeze?)!

Here is the chart that should scare the bears the most (Tesla!):

Tesla (TSLA) Weekly Chart with 200-Week Moving Average Line

Tesla's stock price was actually UP more than 10% last week!! For a company that is burning through $1.5 billion in cash per quarter, Tesla's valuation is nothing short of miraculous! While Elon Musk, Tesla's CEO and resident wizard, may have discovered the secret of turning lead into gold, Tesla's stock price action last week suggests the alternative strong possibility of a takeover attempt on the near-term horizon.

Bottom line: While I continue to believe that a major bear market is now underway in the U.S. stock market, I see a meaningful "counter trend" rally immediately ahead. Bearish traders and investors need to cover shorts and remain sidelined until the next favorable sell-side entry point!

U.S. Stock Market - Daily Chart Sell Signals Triggered Today March 13th!

Daily chart sell signals were triggered today by my computer trading system in the following major U.S. stock market indexes:

New York Composite Index

Nasdaq Composite Index

S&P 500 Stock Index

S&P 100 Stock Index

Russell 2000 Small Cap Index

After the historic melt-down of 11.8% in 10 trading days from January 26 to February 9, the U.S. stock market posted an equally historic rebound (melt-up) which now appears to have topped out in first-hour trading this morning March 13. 

In addition to the sell signals that were triggered in most major stock market indexes today, many key technology stocks like Apple and Amazon also reversed to the downside.

While any number of catalysts could be offered for today's key downside reversal, President Trump's executive order which halted a potential $117 billion merger between Broadcom and Qualcomm was monumental, in my view.

Bottom line: The next major swing in U.S. stock prices will be to the downside. Today's key reversal probably marked the beginning of a sustained sell-off that will test the intra-day lows established on February 9, 2018.

Apple Daily Chart

Nasdaq Composite Daily Chart

Russell 2000 Daily Chart

S&P 500 Daily Chart