{"id":51986,"date":"2020-03-10T01:42:35","date_gmt":"2020-03-10T08:42:35","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=51986"},"modified":"2020-03-10T01:45:22","modified_gmt":"2020-03-10T08:45:22","slug":"t2108-update-200309","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2020\/03\/10\/t2108-update-200309\/","title":{"rendered":"Second Derivative Selling Produces A Stock Market Crash – Above the 40 (March 9, 2020)"},"content":{"rendered":"\n

AT40<\/strong> = 4.2% of stocks are trading above their respective 40-day moving averages (DMAs) (9th oversold day)
AT200<\/strong> = 11.4% of stocks are trading above their respective 200DMAs
VIX<\/strong> = 54.5
Short-term Trading Call<\/strong>: bullish<\/p>\n\n\n\n

Stock Market Commentary<\/strong><\/h2>\n\n\n\n

The Shake and Bake bottom<\/a> completely collapsed on Monday in the face of massive second derivative selling. The stock market is officially in “anything can and will happen” territory as a rolling global crash began Sunday night<\/a>. The extreme oversold conditions keep getting more extreme. The sellers completely dominated the trading action and have essentially pushed the stock market into bear market territory.<\/p>\n\n\n\n

Oversold<\/strong><\/h3>\n\n\n\n

AT40 (T2108)<\/a>, the percentage of stocks trading above their respective 40-day moving averages (DMAs), hit new lows as the oversold period stretched into its 9th day. My favorite technical indicator was last this low at the end of the big 2018 sell-off that bottomed December 24th. I would like to think that history will soon repeat itself with a sharp rebound, but this time looks a lot different with so many negatives weighing down on the market and the global economy.<\/p>\n\n\n\n

\"AT40
AT40 (T2108) plunged from 9% to 4% and hit a 14-month low.<\/figcaption><\/figure><\/div>\n\n\n\n

While AT40 is at extremes, AT200 (T2107), the percentage of stocks trading above their respective 200DMAs, is the signature of a bear market. At 11.4%, AT200 says that the vast majority of stocks are suffering under their critical long-term trend lines. Anyone and everyone long the market is in some kind of pain. What makes this time so different is that the path to this point was nearly vertical whereas the last trip to these levels was more diagonal. In other words, this plunge is particularly violent, abrupt, and panicked.<\/p>\n\n\n\n

\"AT200
AT200 (T2107) cratered from 23% to 11% and hit a 14-month low.<\/figcaption><\/figure><\/div>\n\n\n\n

At 9 days in duration, this oversold period is very likely to end with the S&P 500 (SPY) printing a net loss. The chart below shows that starting at 10 days in duration the index has left oversold territory with a loss. That projected loss gets worse the longer these oversold conditions last. The S&P 500 is now down 11.9% since going oversold on February 26th<\/a>. The good news is that odds favor buying here for an eventual gain within 5-7 trading days. If the oversold period lasts even longer, then this oversold period will become truly historic. The last two points on the chart below come from the 1987 stock market crash and the financial crisis.<\/p>\n\n\n\n

\"Performance
Performance of the S&P 500 (SPY) after an oversold period ends<\/figcaption><\/figure>\n\n\n\n