A very clear situation
Posted by Danny on November 7, 2016
Stocks have come under increasing pressure and important support levels are slowly giving way. The recent lunar green period ended with a 190 point loss for the Nasdaq, one of the worst green periods this year, and continuing the pattern of lunar cycle inversion we have seen all year. As we have been pointing out for weeks, the path of least resistance has turned down. But will it stay that way? Let’s have a look at the S&P 500:
The important 2120 support level has not held up the market and I would now expect 2120 to become overhead resistance for any upward move. This index has dropped to the lower bound of the down trend channel we pictured a few weeks ago. This means it is still not a break down from which it is hard to come back. But it offers us a very clear situation now.
If the S&P drops any further, say below 2070, then we are likely to get a downside acceleration with the first meaningful support just under 2000. If on the hand the S&P bounces back and makes a convincing move above the 2120-2140 zone, then the road towards new highs would open up.
My 3 indicators are all in bottom territory, but not turning up yet. The MoM is entering the blue-depressed zone, which normally happens only a few times a year. We just don’t know yet when and where it will turn back up. But I will be ready for it.