Market Beginning a New Down Swing

Jun 3, 2008: 6:06 PM CST

It’s time for lower prices in the major US Indexes!  So there are no guarantees, but the odds seem to favor a higher chance for more downside action in the short-term future.  Let’s see why:

First, the Dow Jones Daily Chart:

Price failed at the confluence of the 20 and 50 EMAs

Price formed a reversal candle pattern (doji, bearish engulfing, evening star – call it what you will)

Price is in the middle of a mini-bear-flag, with pattern target near 12,000.

Price also formed a sort of ‘falling three method’ bearish continuation candle pattern.

The Fed announced it is more concerned with inflation and unlikely to cut rates further.

There is more ‘room’ to the downside than the upside.

Moving averages have now formed as resistance.

Possible Target:  At least 12,000

Let’s view the S&P for a similar structure:

I cheated and drew a ‘dark arc’ on the chart, which shows the larger structure of the price swings rolling over, forming a lower high, and just points away from carving out a new swing low, which would confirm a mini-short term downtrend on the daily chart, reversing the ‘bear market bounce’ we just experienced.

Recall that the primary trend is still down.

Let’s be defensive and see what happens (or position ourself possibly aggressively to the short side).

2 Comments

2 Responses to “Market Beginning a New Down Swing”

  1. Don Da Mon Says:

    Should there be a consideration of the pivot point resistence?

  2. Corey Rosenbloom Says:

    Don,

    The market is actually pausing (temporarily) at its 38% Fibonacci retracement off the March lows. Theoretically, price could hold here, but I would say odds favor breaking this level to test the 50% or perhaps the 62% retracement of the previous upswing.

    The series of lower highs bears this out as well that the short term trend may be rolling over.