Here is my chart evaluation for the action seen this past week Bears have gained short-term control with the negatives of the war with Iran, confirmed with negative economic reports. DOW Friday Closing Price - 45577 SPX Friday Closing Price - 6506 NASDAQ Friday Closing Price - 23898 RUT Friday Closing Price - 24381 The war with Iran continued to have negative implications on the Indexes, but that was also supported with the economic reports that came out this week that showed higher inflation (PPI), lower GDP growth, higher unemployment and a lower Consumer Confidence. All of these factors, in addition to the Fed deciding to leave rates unchanged, generated new 6-month intraweek and weekly closing lows that brought about sell signals that confirmed that the uptrend has ended and that at the very least, a sideways market is in place, if not the start of a downtrend. Chart-wise, this is what happened. In the DOW a new failure signal was given when the index closed below a previous weekly closing high at 47562, as well as a new sell signal with the close below 46245. The bulls were successful enough in rallying the index in the last 15-minutes of trading on Friday to prevent another sell signal from occurring, with the index closing above the 45479 level, even though it was trading below that level in the hour before the close. Nonetheless, the index (as well as all the others), closed near the lows of the week, suggesting that this Friday that sell signal will occur if the war with Iran has not ended. In the SPX, the index generated 2 failure signals (having closed below the 2 previous all-time high weekly closes at 6840 and at 6715) and well as 2 new sell signals (having closed below both weekly close supports at 6602 and 6552). And in the NASDAQ, the index closed below 1 previous all-time high weekly close at 24785, as well as closing below 2 previous low weekly closes of consequence at 24239 and at 24209. These signals are all of consequence, meaning that positive fundamental news on both the economy and the war with Iran would need to come out, in order for them to be negated. The latter is possible but the former cannot occur until next month, suggesting that the computers and algorithms will be sellers for the next 4 weeks. This does strongly support the negative chart signals given this past week. Like I said up above, all the indexes closed near the low of the week, suggesting further downside below last week's lows will be seen this week. In the DOW that is below 45369, In the SPX that is below 6473, and in the NASDAQ that is below 23759. The indexes have dropped anywhere between 7.6% (SPX to 11.5% (RUT), meaning they are now in a full-blown correction status. Drops of as much at 19.9% can happen in a correction, before it becomes a trend change (from an uptrend to a downtrend), meaning that for now this is a sideways trend. Based on the charts, here are the downside objectives to be reached either this week or within the next 3 weeks. In the DOW that is the previous all-time high weekly close of consequence (lasted 8-months before being broken) at 44910. Nonetheless, on an intraweek basis, there is no support until 43340 is reached. If that level is broken, it will generate immediate further downside. In the SPX, the objective is 6110 (on a weekly closing basis). That is also the previous all-time high weekly close that lasted 8-months before being broken. There is some (minor) intraweek support at 6212. In the NASDAQ, the objective is 21114 (the same 6-month previous all-time high weekly close). There is some minor intraweek support at 22959 and again at 22673. One additional and important negative chart action that occurred this week was the fact that all indexes closed below the 200-day MA, which had not happened since May of last year. As such, that line is now resistance (on a daily closing basis). In the DOW the line is at 46562, in the SPX the line is at 6621, and in the NASDAQ it is at 24359. It is expected that line will be seen this week (as a retest of the break), but it is unlikely that a confirmed close above the line will occur. If that happens and further confirmation occurs (DOW with a daily close above 46993, SPX above 6716, and NASDAQ above 24780), a lot of the sell pressure will be relived. As such, these daily close levels are going to be indicative resistance from this point forward. For the sake of mentioning it and in looking at the weekly charts, all these negatives will be negated totally if the following intraweek highs are broken (not likely to happen. In the DOW, a rally above 48431, in the SPX a rally above 6920, and in the NASDAQ a rally above 25343. This past week was definitely a "game changer" that has turned the computers and algorithms against the bulls for the next few weeks. In spite of the already decent corrections that have occurred, more, downside is expected to be seen. |
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