The back and forth in the markets continued as yesterday’s gains were undone by today’s higher volume selling.
The concern with today’s action is that the consolidation in the S&P has the look of a bearish continuation wedge. And given the potential for a measured move, it opens up the possibility for a push down to 1,650s. A weak ‘buy’ signal in the MACD could trap more bulls.
The Nasdaq accelerated its relative performance down (against the S&P). Today’s 2%+ loss pushed prices back to last Wednesday’s trading range. Additional losses will push into the spike low. The ‘Golden Cross’ was also undone with a return of the 50-day MA below the 200-day MA.
The Russell 2000 experienced losses as part of a ‘bear flag’, but the losses were lighter than other indices – which improved its relative performance. The ‘bear flag’ remains contained by former support turned resistance. Together, lower prices look favoured in the short term, but a return above wedge support would confirm a ‘bull trap’. Note the ‘Death Cross’ between the 50-day and 200-day MA; confirmation of bearish change in long term trend.
The Dow was another index to flash a ‘bear flag’.
For tomorrow, watch for confirmation breakdown’s from the bearish wedge / flags. Markets could accelerate quickly lower if there are gap downs off the open. Long term buyers should be getting ready with another tranche of funds to take advantage of a new swing low (should it occur).
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