It has been now almost ten years since the last serious financial crisis. We are not talking about the relatively minor pullbacks in the stock market, of course. Is the financial system stable now? When and why the next crisis can come? What might be the major causes for such an event? Oh, if we only knew…
However, one of the brightest minds on the Wall Street, Dr. Marko Kolanovic (his Ph.D. is in theoretical physics) warns about possibility of such an event (it is part of a very detailed and substantial 168 pages report published by JPMorgan).
He thinks that computerized trading and the abundance of passive investments set up the stage for a major calamity. Due to the speed of the trading algorithms, the liquidity in certain underlying instruments can disappear very quickly, and this will lead to the well-known phenomenon of sharp drops in the indices. A huge number of institutional and retail investors own the same positions either directly or via ETF’s and other instruments. If for some reason they all decide to sell even one position (think about Tesla’s CEO interview last week), this might lead to a complete collapse of the market.
Almost all trading algorithms stop trading during very volatile markets, and this might completely dry out the market. The banks will have to step in, the government will step in, a lot of pension funds will collapse, retail investors will lose their savings and this might lead to social unrest. Dr. Kolanovic does not necessarily predicts that but warns about the signs appearing on the horizon. Dr. Harari in his book “Home Deus” is asking a question about the soul and consciences of computer algorithms. They have none! Home Sapiens do, and their reaction to such market events might be very disruptive.
Once again, this is not a prediction but rather a food for thought.
SPY saw its Moving Average Convergence Divergence Histogram (MACD) turn negative on April 01, 2024. This is a bearish signal that suggests the stock could decline going forward. Tickeron's A.I.dvisor looked at 49 instances where the indicator turned negative. In of the 49 cases the stock moved lower in the days that followed. This puts the odds of a downward move at .
The Momentum Indicator moved below the 0 level on April 04, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on SPY as a result. In of 63 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
SPY moved below its 50-day moving average on April 15, 2024 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for SPY crossed bearishly below the 50-day moving average on April 19, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 13 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where SPY declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The RSI Oscillator points to a transition from a downward trend to an upward trend -- in cases where SPY's RSI Oscillator exited the oversold zone, of 27 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .
The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 7 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where SPY advanced for three days, in of 358 cases, the price rose further within the following month. The odds of a continued upward trend are .
SPY may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
The Aroon Indicator entered an Uptrend today. In of 451 cases where SPY Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
Category LargeBlend