Falling Knife Catchers Are About to Learn a Lesson

Today, in our analysis, we’ll focus on the United States, where the US surpassed China in the number of total COVID-19 cases. For the past few days US indices were rather resistant to the global correction we are witnessing with indices such as the DAX falling far behind their foreign counterparts. As of yesterday, we saw a slight turn around with both the SP500 and the DOW Jones managing to catch up with the bullish race.

The DAX managed to retrace its coronacrash level of 38,2% on Wednesday while futures on the SP500 managed to do the same a few hours ago. 38,2% is considered a decent place for a comeback to the main trend. The potential for a bearish movement is even higher here, as the price bounced from the upper line of the flag formation and is creating a head and shoulders pattern. All this indicates a south-bound movement and a breakout of the lower line of the flag. The consequence could be a major sell signal.

Another one is the DOW Jones, which also stopped at the 38,2% level. In this case, instead of a flag, we have a wedge but the outcome of those two formations is the same – a trend continuation.

Since we’re covering the U.S. Market, let’s talk about the USD, where the Dollar Index managed to correct the 50% of the upswing from mid-March. Currently the price is creating a nice reversal pattern (engulfing on H4 and a hammer on D1). We can assume that we’re about to come back to the main bullish trend here.