Weekly Chart Perspective on the Steep Stock Market Selloff

Aug 21, 2015: 12:09 PM CST

Given the negative divergences in momentum, volume, breadth, and market internals – along with the “arc” trendline distribution pattern – stocks had extremely high odds of breaking lower into a steep retracement.

At the moment, that’s precisely what they’ve done this week, right on schedule (or perhaps a little overdue).

Let’s update our Weekly Perspective charts of the Dow Jones, S&P 500, and NASDAQ to note what’s happened, what preceded it, and more importantly what do we do now.

We’ll start as usual with the S&P 500 Weekly Chart:

Under the stimulus of QE3, stocks rallied in a stable, persistent uptrend from 2013 into late 2014.

From 2015 to this week, stocks traded in a sideways distribution or “arc” pattern complete with lengthy negative divergences in momentum, volume, and Breadth.

Be sure to view the “What Breadth is Saying about the Current Market” chart I’ve been promoting – and its correct message.

Here’s a specific planning chart from last night’s “Idealized Trades” Member Strategy Report:

The quote in blue is from Wednesday’s report, while the quote below is from Thursday’s report:

“At the moment, that appears to be exactly what’s happening.

Price was in DISTRIBUTION mode with DECLINING (deteriorating/diverging) Breadth and Market Internals and – as I noted – virtually every chart-based metric argued for lower prices.

As long as price remains under – and moving down away from – the 2,045 target level (achieved), then we’ll expect a continued “larger” retracement toward 2,000 or even 1,980.”

Note the “Rounded Arc” Arrow that pointed straight toward 2,000 – exactly where we are right now.

This big sell-off should not be a surprise.

Please join fellow members if you feel real-time strategy planning, education, and analysis would be beneficial to you (we believe it will) along your trading journey – we’d love to have you as a member.

For now, we’re focusing on the 2,000 “Round Number” Reference Target (achieved) and marking it as our short-term pivot.

Beneath lies 1,180 if sellers continue to push this market lower in ongoing distribution.

The Dow Jones Index is weaker than the S&P 500:

We see the same negative divergences in virtually all metrics in the Dow Jones.

Price failed just above the 18,000 level and then broke impulsively this week under the 17,500 pivot.

The result was a logical and expected “deep retracement” straight toward 17,000 and now the 16,500 level.

I expanded the perspective to show key longer-term Fibonacci Retracement levels in the event price does continue its steep retracement to lower support targets.

The first major target – price and Fibonacci – would be the 16,000 target.

Finally, the NASDAQ is the strongest of the three main US Stock Market Indexes:

While the S&P 500 and NASDAQ developed a sideways trading range, the NASDAQ continued trading higher, albeit within the context of a lengthy negative divergence environment.

When the NASDAQ broke under the 5,000 level, it set in motion the current ‘collapse’ toward the rising 50 week EMA near 4,800 where price trades currently.

As you study these charts, the broader trends, and the probability for either a support-bounce at current target levels OR a continuation of the retracement to lower support levels, be sure to focus on the indicator factors – mainly the divergences – that set the stage for the current volatile action.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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6 Comments

6 Responses to “Weekly Chart Perspective on the Steep Stock Market Selloff”

  1. Start the Week with a Monthly Chart Perspective of the Collapse | Afraid to Trade.com Blog Says:

    […] Perspective of the Stock Market Collapse Aug 24, 2015: 10:24 AM CST Friday, we discussed a “Weekly Chart Perspective of the Retracement” so let’s take a moment to start Monday with an even larger perspective of where […]

  2. Start the Week with a Monthly Perspective of the Stock Market Collapse | Margin of Safety Says:

    […] we discussed a “Weekly Chart Perspective of the Retracement” so let’s take a moment to start Monday with an even larger perspective of where […]

  3. Dow Jones Industrial Average, S&P 500, NASDAQ Composite: Monthly Perspective Of The Stock Market Collapse | Stocks, Bonds and Mutual Fund Investing Says:

    […] Rosenbloom:  Friday, we discussed a “Weekly Chart Perspective of the Retracement” so let’s take a moment to start Monday with an even larger perspective of where […]

  4. Today’s Midday Update is Very Different from Yesterday’s Aug 25 | Afraid to Trade.com Blog Says:

    […] Also, compare that with the real-time expected sell-off we’re seeing in today’s morning update: Weekly Chart Perspective of the Steep Stock Sell-Off […]

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