Overdue Retracement Triggers in US Stock Market

May 26, 2015: 9:31 AM CST

We’ve been waiting for this moment as the market crept to new highs on massive divergences – odds were extremely high for exactly the sharp sell-off swing we’re seeing now.

Let’s step inside the market as we start the holiday week and pinpoint what’s happening:

As I’ve been highlighting on the blog and to Members, this rally and breakout was FAR more likely to result in a BULL TRAP as opposed to a true, impulsive breakout.

After a few days too long of being held up at the highs, gravity finally took over and price fell lower away from the 2,130 level as indicators and probability strongly suggested.

In the chart above, we see the S&P 500 @ES E-Mini Futures contract with NYSE Breadth – Advancing Stocks minus Declining Stocks.

Generally you want to see a breakout be confirmed with an increase in volume and internals (such as Breadth) – if so, it increases the odds that the breakout will succeed and we can profit from a breakout price impulse.

If, however, price breaks out but nothing else pushes to new highs… and indicators form lower highs (divergences), it increases the odds that the breakout will fail and a “trap” will play out to the downside.

Today’s session unhinged the market from the highs, and we’re seeing the initial sell-swing take price back under the breakout level (2,114).

Price is in a movement “down away from” the prior high and the prior breakout level and our trading strategies will reflect this new – expected – development.

Here’s the move playing out on the four-futures grid:

The S&P 500 futures failed into the 2,130 level on today’s breakdown under 2,120.

The Dow Jones futures failed into 18,300 and broke impulsively under the 18,200 support.

The NASDAQ futures failed into 4,540 and broke 4,520 to trigger a trend day.

Finally, the Russell 2000 futures contract failed into 1,260 and triggered a break today under 1,250.

Focus on these levels and the movement lower toward lower price support target levels.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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4 Responses to “Overdue Retracement Triggers in US Stock Market”

  1. Four Market Money Flow Update on Today’s Big Move | Afraid to Trade.com Blog Says:

    […] Four Market Money Flow Update on Today’s Big Move May 26, 2015: 10:19 AM CST The US Stock Market sell-off isn’t the only big money flow event happening today. […]

  2. Breakdown Stock Scan and Trend Day Market Update May 26 | Afraid to Trade.com Blog Says:

    […] Take a look at this morning’s post on the expected breakdown event. […]

  3. May 27 Rally Up Market Update and Big Stock Scan | Afraid to Trade.com Blog Says:

    […] Be sure to reference yesterday’s post on the expected breakdown event. […]

  4. Rana Says:

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