2022/04/25 (032) Technical Analysis

China´s new lok downs in focus,
while moderate gains respite on Wall Street.
Elon Musk buys Twitter! Comeback for free spech?

Moderate gains respite on Wall Street

After the heavy losses on Friday, the US stock markets have at least stabilized. Nevertheless, the mood remains tense, with the interest rate turnaround in particular continuing to weigh heavily on the markets. After an initially directionless trend, the US stock exchanges have stabilized over the course of trading. The Nasdaq technology stock market fared best, with interest aroused especially towards the end of trading. The composite index increased by 1.29 percent to 13,004 points, and the Nasdaq 100 index also rose 1.32 percent to 13,533 points.

China in focus

In addition to the dominating interest rate issue, investors are primarily worried about the situation in China. After the discovery of a few dozen corona infections in Beijing, all 3.5 million inhabitants of the largest district, Chaoyang, have to be tested in three rounds every two days. The fear of strict curfews also in the Chinese capital caused hamster purchases and empty shelves in supermarkets. “In China, the government can’t think of any alternative to its zero-Covid strategy,” explained the analysts at LBBW. “Shanghai remains sealed off, the ports remain closed and the ship jams are getting longer and longer.” The economic metropolis of Shanghai is already entering the fourth week of a tough lockdown. The prices for the North Sea variety Brent and the US light oil variety WTI fell between five and six percent. Brent has meanwhile slipped below the $100 a barrel mark.

Elon Musk buys Twitter

The high-tech entrepreneur Elon Musk buys the short message service Twitter for around 44 billion dollars (almost 41 billion euros). Shortly before the market closed, Twitter announced a “final agreement” for Musk to take over the online service. The founder of the electric car manufacturer Tesla and the aerospace company SpaceX will therefore pay $ 54.20 per Twitter share. As a result, Twitter should then be taken off the stock exchange. Last week, Twitter’s board of directors tried to prevent a takeover by the richest person in the world. He now gave up his resistance.

Musk announced in mid-April that he wanted to completely take over Twitter. The 50-year-old had previously bought just over nine percent of the shares, making him the largest shareholder in the short message service. Musk said he wants to make Twitter “better than it’s ever been.” Twitter shares rose sharply by more than 5.6 percent, but remained below the agreed takeover price.

Important basic technical price areas for the NASDAQ 100 Index

If the previous lows are not recaptured by bulls, further price losses are imminent.
Above all, aorund the recent interim new lows at 13.724 (01/24/2022), at 13.065 (02/24/2022), and or 13.020 (13/03/2022). Basically, if the NDX trades at least 20% from the last all-time high, we are honest and competent in a bear market. I’m a friend of the old school – not only when it comes to participating in the financial market. That`s why, I will not lose myself in new definitions. So that I will only ever speak of a bear market when the NDX is trading at 13411 points and lower. However, the 13411 price area is not that important in itself. Much more because the subject of the bear market itself, in the media, is also addressed by other financial market participants, which then, more or less, sooner or later, leads to an even more volatile market price asctions. And that`s why bulls/bears usually question their medium-term optimism/pessimism in such technical market price action scenarios. And then, based on that, (not) reposition theirself long/short.This trading capability has been open since our 4th edition, at 14,500 points (02/16/2022)

And don’t get me wrong: consider the 3 other long (APPL, FB, MSFT) and one other short (TSLA) trading capability, in this context. Because at the NDX, the litter separates from the wheat, as we say colloquially here in Germany (in my home country). For better or for worse, companies that have been guaranteeing profits for decades are given a higher fundamental valuation, in the truest sense of the word, in the current financial market scenario (with an expensive yield curve). As companies that have not (yet) made profits for decades. Let alone you pay out to their shareholders. Since the yield curve is becoming more expensive at the same time. And thus again an asset alternative for many financial market participants. From this point of view i am basically short in the NDX – incl. long trading capabilities in some profit machines (like APPL, FB, MSFT), which have already proven over the past decades that they don’t have to hide from an expensive yield curve. On the contrary! How ever, if the animal instincts, let alone childish emotions, overwhelm us self-determined financial market participants due to the volatile rising/falling daily price actionst, then no reasonable rational analysis and insight, like the one just tried, will help. Are companies that have guaranteed profits for decades given a higher fundamental valuation, in the truest sense of the word. As companies that have not (yet) made profits for decades. Let alone you pay out to your shareholders. Since the yield curve is becoming more expensive at the same time. And thus again an asset alternative for many financial market participants.Runaway down gap confirms my fears

For the further course of the NDX, at least in my opinion, the 3 days (from April 6th, 2020, April 7th, 2022 & April 8th, 2020) are groundbreaking. Since after that, if you will, two attempts at bullish recovery failed in retrospect. And thus confirming the overriding medium-term bearish technical chart. So the question arises: 20% correction? Or more?

Further lower prices up to 12,000 points are still possible. However, nobody has died from taking profits, so that profits can already be realized by 13,000 points. Because I formulated the bearish trading capability in conjunction with the other three long trading capabilities to mitigate our upcoming losses in these 3 positions. Since I’m basically still bullish, at least as far as these 3 stocks are concerned. Should you manifest a trend reversal formation on the chart this spring or summer respectively. And the FED shouldn’t raise interest rates as quickly and sharply as we NDX bulls fear. Therefore, only a green bullish traffic light again, for the entire NDX, should the GAP be closed again – and we are trading prices of 14,750 points and higher again.