Markets broke down yesterday.
This means the window for potential new highs is now going to be closed for a while.
Looking for possible downside targets, this chart can become useful (click for larger image):
The important green trend line was now clearly broken again, and this means the first support should come at the blue line, currently around 1620.
Below that we also have 1575 and 1535 as next lower targets where support is likely.
These are targets for a mild correction, which could last 6 to 8 weeks.
If the 1535 level gets broken convincingly, then a longer bear market becomes likely.
Yesterday’s drops have also sent most stock markets into decline mode on the basis of my key reversal levels.
The Nasdaq is now in decline mode with a daily key reversal level of 3634. So, a daily close above 3634 would swing it back into rally mode.
The S&P 500 is also in decline mode with a daily key reversal level at 1687.
The FTSE 100 has entered decline mode as well, with its daily key reversal now at 6591.
The DAX index remains in rally mode, and continues to do so as long as it closes above its daily key, currently at 8256.
More on the key reversals in my weekend post.
Good luck,
Danny
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LunaticTrader 
Hi Danny, thank you for the post. How does the impending decline in S&P reconcile with the Earl indicator which seems ready to spring up anytime. So could there still be a rally in the next couple of days followed by the decline you are talking about?
Sure, there will be rallies, you can even have some powerful up days . Eventually the Earl will turn up, and then it can easily rally or go sideways for a week or two.
But given the situation we have on the chart, I think those rallies will be sold.
Or in other words: if we are going towards one of the mentioned downside targets, then I wouldn’t expect us to go there in a straight line.
Once the Earl2 bottoms out and turns up again, that’s when I will start looking to initiate longer term bullish positions again.
Sometimes the market keeps climbing even with the Earl2 weakening, as we saw in February-April. But that’s the exception, not the rule.
Thank you for the post Danny. What about the Earl indicator. It seems like it is due for a bounce anytime. In the wake of that, do you still think we won the have any chance of a rally in the next couple of days?
Reblogged this on thedarklordblog and commented:
Top work from Danny here in his latest post.
DYOR
TDL
Thanks for reblogging.
No prob…like the work Danny. Regards