Yesterday morning Credit Suisse announced a $4.7 billion writedown, management shakeup, and dividend cut due to their exposure to Archegos Capital, explains Ian Murphy of MurphyTrading.com.
$2.3 billion worth of shares in three US-listed firms were sold to raise cash. Looking at those stocks to see how traders holding positions would have been impacted we notice ATR trailing stops performed perfectly.
On daily charts of ViacomCBS (VIAC), Vipshop Holdings (VIPS) and Farfetch Ltd. (FTCH) all three trailing stops were filled before the selloff. The corresponding weekly stops are shown in red dashed lines and none of those were gapped over either.
The large-cap stocks in the S&P 500 (SPX) continue to diverge from the rest of the market, as shown with the pink dashed lines above. This is a flashing red light, when pessimism starts rising, the alarm bell also starts ringing. Look at the previous divergences, all was fine until pessimism started rising. I will be watching that red line like a hawk this week.
Learn more about Ian Murphy at MurphyTrading.com.