Hi Guys,
Yesterdays session saw a massive selloff on the US indices. After months of non stop upward momentum the market came to a halt last month only to pick up from where it left off when we made the lows from the recent correction. Or so it seemed. Big reversal outside engulfing candles on the daily for Nasdaq and SP 500 were a precursor to yesterdays selloff but my attention has been mostly on the dow and the intensity of the selling from the highs both times price reached that level. I recently posted an article about the DOW and the level of the green box on the chart, which is the 0.618 fib extension of covid lows to bear market hi to low, a very significant level for this index. Coupled with that the other box on the chart is also another significant level, the 2.0 retracement of the covid hi to low.
As can be seen from the weekly chart the DOW looks to be in a lot of trouble. A double top being formed which of course can be confirmed if we break and close below the neckline , i.e the support created from the recent correction. The most ominous look about the chart are the bearish engulfing red candles at both highs. Those two bars speak volumes about the selling pressure that the dow has faced both times it has reached that level. There has been no respect of daily fib levels on both runs down from the highs again indicating the massive selling pressure. No support offered at the previous resistance from the latest move up, that should have become support, which was coincidentally the golden fib zone and 0.618 level of the recent selloff.
The RSI is showing massive divergence on the weekly, so more signifigance for that indicator on a higher time frame. If we look back at the last three times the weekly RSI was in oversold and proceeded to make a lower low , each occasion was at or very close to a market reversal or massive correction.
I am not suggesting that we are going to have a crash from here, merely pointing out some very worrying signs for the dow. Main thing is to manage risk as markets are very volatile at the moment and let price action be the guide.
Safe Trading all
Yesterdays session saw a massive selloff on the US indices. After months of non stop upward momentum the market came to a halt last month only to pick up from where it left off when we made the lows from the recent correction. Or so it seemed. Big reversal outside engulfing candles on the daily for Nasdaq and SP 500 were a precursor to yesterdays selloff but my attention has been mostly on the dow and the intensity of the selling from the highs both times price reached that level. I recently posted an article about the DOW and the level of the green box on the chart, which is the 0.618 fib extension of covid lows to bear market hi to low, a very significant level for this index. Coupled with that the other box on the chart is also another significant level, the 2.0 retracement of the covid hi to low.
As can be seen from the weekly chart the DOW looks to be in a lot of trouble. A double top being formed which of course can be confirmed if we break and close below the neckline , i.e the support created from the recent correction. The most ominous look about the chart are the bearish engulfing red candles at both highs. Those two bars speak volumes about the selling pressure that the dow has faced both times it has reached that level. There has been no respect of daily fib levels on both runs down from the highs again indicating the massive selling pressure. No support offered at the previous resistance from the latest move up, that should have become support, which was coincidentally the golden fib zone and 0.618 level of the recent selloff.
The RSI is showing massive divergence on the weekly, so more signifigance for that indicator on a higher time frame. If we look back at the last three times the weekly RSI was in oversold and proceeded to make a lower low , each occasion was at or very close to a market reversal or massive correction.
I am not suggesting that we are going to have a crash from here, merely pointing out some very worrying signs for the dow. Main thing is to manage risk as markets are very volatile at the moment and let price action be the guide.
Safe Trading all
Note
The fib levels on th chart are from current weekly support level to current high and all levels should we get a deep pullback make sense in regards to fib ratios,. I would personally love to see a retrace all the way down to support and that picture perfect weekly order block candle that will launch the dow straight back up towards the highs.
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.