The past week has been nothing but tracking a structure, a diagonal to be precise. This structure shows up at the ends of moves as momentum wanes and finally gives way to a spectacular change in trend. Friday was that day.
The above general structure appeared in multiple markets and from the standpoint of one wanting to short, all that was required was patience. Not all the markets busted channel support, but it is evident that the small caps are going to lead this decline. Exhibit A The Russell 2000. The decline at a minimum has another 20pts to go before it catches any sort of trendline support. Although it reclaimed the lower trendline and closed within, but the damage is already done.
The Nasdaq Composite also pierced support opening the door to continued downside. I'm expecting all the posted charts to find the 23.6% retrace at a minimum, but more than likely will at least find the 50% mark at which point we'll need to evaluate the shape of the decline to see if it is impulsive looking or not.
The Dow Jones Industrial Average is currently playing ping pong between multiple trend lines but I fully anticipate downside resolution and a similar 50% retrace.
Finally the S&P 500 which has more of a channel structure as opposed to a diagonal, but it works exactly the same although it is not quite as obvious as the rest of the charts. No technical damage as of yet, but I fully expect that to change early next week.
All in all it seems the markets want to do some correcting, so it would be best to stand aside for the time being if you are of the bullish sort.
No comments:
Post a Comment