Why do we think it's too early to invest in US stocks now? Logic Investment Market Review 240811

Key points of this article:

𝒪 The US stock market still hasn't seen a second leg down, so don't prematurely bet on a rebound.

𝒪 Operations on various indices, commodities, and forex.

◉ Hong Kong and Japan Markets

Compared to other markets, the Hang Seng Index showed strong resistance this week, even recovering above the 17,000-point level. However, the current trend remains more downward than upward, and it's not yet time for bulls to enter the market.

What needs to be observed next is where the next downward wave will fall.

The worst-case scenario is breaking below 16,450, continuing the downward trend. If it stabilizes near 16,450, it indicates a consolidation phase. If it holds above 17,000, it signals a rare upward trend, presenting a buying opportunity.

After last week's sharp decline, the Nikkei recovered at a slower pace this week. Our Nikkei futures have been fluctuating within a range over the past five days, with daily highs quickly retreating, showing significant resistance. We maintain our short-selling stance and will share intraday trading opportunities in the member group.

As shown in the chart below, we shared an entry point for Nikkei futures on August 8 via Discord, successfully capturing the turning point.

◉ US Market

Both the Nasdaq and S&P 500 are still in a clear rebound phase within a downward wave.

However, we observed an interesting phenomenon this week: many traders quickly bought back their positions after the recent plunge, believing in a V-shaped rebound and new highs for US stocks. But technically, this is premature, as there's no second bearish test wave yet, similar to the Hang Seng Index scenario.

Take the Nasdaq as an example: only if the next downward wave stops at or above 17,650 can we say the second leg has formed and the market has bottomed. Otherwise, shorting remains the true trend-following strategy, and now is an opportunity to short at highs.

The Russell's performance over the past two weeks explains why I dislike trading it: in recent years, large-cap stocks have driven the market, while small-cap stocks have been neglected. Small-caps show weaker resistance during market plunges and are riskier than large-caps during rallies, offering inadequate returns.

US Treasury futures showed a clear reversal signal last Monday: during a strong uptrend, heavy selling completely erased a large bullish candle, forming a long upper shadow bearish candle. The subsequent decline was unsurprising. Bulls are fortunate that 113 is a resistance-turned-support level from January. If it holds here, the uptrend remains intact.

◉ EUR/USD

After a failed breakout and forming a long upper shadow, EUR/USD has been declining slowly. However, the previous rally was too strong, and the trend remains robust. Unless a second top forms, shorting isn't considered yet.

◉ USD/JPY

Last week, we noted that USD/JPY had broken below all support levels, with clear downward waves visible on the chart. We'll enter short positions if upward momentum falters.

◉ Gold

Gold was testing highs last week but unexpectedly fell to previous lows by Monday, indicating extreme volatility. Technically, it's in a clear consolidation phase, currently in the middle of the range, making daily trading less favorable.

◉ Crude Oil

Crude oil broke below previous lows but recovered, showing slightly stronger momentum. We'll wait for it to approach 74.8 before assessing bullish support.

◉ Cryptocurrency

Cryptocurrencies rebounded sharply on Thursday, with Bitcoin and Ethereum forming large bullish candles. However, a single bullish candle can't reverse the prior downtrend, and weakness is reappearing today. We maintain our short-selling approach.

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