Market Violently Sells Off Today

Feb 5, 2008: 9:48 PM CST

On the US “Super Tuesday” when almost half of the states held a primary election, the US Stock Market slid 3%, casting its vote against the major candidates.

No seriously, the weak consumer services sector, which comprises a large percentage of the consumer spending category, took a major hit today, causing the markets to resume their downtrend and move one step closer to completing an ominous bear flag pattern.

Notice the non-confirmation from volume on the most recent price swing (counter-swing) up. As the price auctioned higher, volume declined. It’s interesting that the price move of 3% today occurred on such low relative volume (less than one billion shares transacted in the Dow Jones).

Also, note that the most recent price swing carved out a new momentum low on the oscillator, forecasting the possibility for new price lows yet to come.

The classic “bear flag” pattern could also be forecasting lower prices. I have taken the liberty to interpret (and draw) the potential bear flag which is currently unfolding.

If the bear flag and the new momentum low forecast correctly, then a new price low could be reached beneath Dow 11,800 before the close of the month.

As an aside, notice how nicely the falling 20 period moving average contained the price action on the NASDAQ:

It is setting up a type of bear flag as well, but not as nicely as the Dow and S&P 500 flags have set-up.

With the daily chart still in a confirmed downtrend, it seems odds favor lower prices are yet to come.

Trade safely and with reserved caution.

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