Tag Archives: trends

The Market Is Gunning For Its Early-2018 Lows

After last week’s powerful sell-off, the U.S. stock market opened much higher this morning, with the Dow up as much as 352 points. Mainstream investors and TV commentators were excited, as they usually are, that the sell-off may have created an excellent “dip-buying” opportunity. I wasn’t buying it one bit, however:

Last week, I wrote that “the market’s trend breakdown had been confirmed” because the U.S. market closed below its important uptrend line that began formed in early-2016. In my mind, this morning’s market pop was nothing to get excited about because the U.S. stock indices were still below their important trendlines (which are now resistance levels), which means that last week’s technical breakdown was/is still intact.

Shortly after my statement, the market erased its gains in one of the worst intraday reversals in years:

bounce chart

The sell-off of the last few weeks caused the S&P 500 to break below its uptrend line that began in early-2016. The next major technical support and price target to watch is the 2,550 to 2,600 support zone that formed at the lows earlier this year. I don’t expect to see much of a bounce until this zone is tested a bit more (the market may need to test the lows of this zone around 2,550).

S&P 500 Chart

At the close of trading last week, the Dow Jones Industrial Average still had not broken below its key uptrend line yet, unlike the S&P 500, Nasdaq Composite, and Russell 2000. As of today, however, the Dow closed below this uptrend line, which is a worrisome sign. I would like to see a close below this line on the weekly chart for further confirmation.

Dow Chart

The Nasdaq Composite index continues to fall hard after closing below its uptrend line that began in early-2016 last week. The index will likely gun for its next price target, which is the 6,600 to 6,800 support zone that formed earlier this year. I don’t foresee much of a bounce until the Nasdaq has tested this zone.

Nasdaq Chart

The small cap Russell 2000 index broke below its uptrend line three weeks ago and has been testing the 1,475 support level. If the index breaks below the 1,425 to 1,475 support zone, it would give yet another bearish signal.

Russell 2000 Chart

I don’t expect much of a bounce until the respective U.S. stock indices test their early-2018 lows, which means that the markets are likely to go even lower in the short-term. Even if/when we get a bounce, it’s not much to get excited about because it is likely to only be a short-term technical bounce or relief rally rather than a sustainable phase of the bull market. I have been warning that we are in a dangerous stock market bubble (please watch my presentation to learn more), so the breakdown of the past few weeks means that the stock market bubble is in the process of popping – a very scary prospect.

Please review our Chief Investment Strategist Lance Roberts’ newsletter from this weekend to learn how we are positioning in this market.

We at Clarity Financial LLC, a registered investment advisory firm, specialize in preserving and growing investor wealth in times like these. If you are concerned about your financial future, click here to ask me a question and find out more. 

The Market’s Trend Breakdown Has Been Confirmed

On Wednesday, after the Dow plunged 608.01 points, I wrote a piece called “The #MAGA Stock Market Trendline Is Broken” in which I showed how the U.S. stock market’s sharp decline caused several major stock indices to break below their important uptrend lines that have formed in early-2016. I described this breakdown as a “very important change of trend.” On Thursday, the Dow rose 399.95 points and the S&P 500 rose 49.46, but I said that the market bounce did not negate the bearish technical developments that took place on Wednesday. Sure enough, the Dow fell 296 points or 1.2% on Friday, while the S&P 500 fell 1.7%, which confirms the technical breakdown under the important trendline that formed in early-2016 (I was waiting for a solid close below this level on the weekly chart).

This week’s sell-off caused the S&P 500 to break below its uptrend line that began in early-2016. The next major technical support and price target to watch is the 2,550 to 2,600 support zone that formed at the lows earlier this year.

S&P 500 Chart

Unlike the S&P 500, the Dow Jones Industrial Average still has not broken below its key uptrend line. If the Dow closes below this uptrend line in a convincing manner on the weekly chart (possibly next week if the sell-off continues), the next important support level and price target to watch is the 23,250 to 23,500 zone that formed in early-2018.

Dow Chart

The Nasdaq Composite index closed below its uptrend line that began in early-2016. The index would need to close back above this trendline to negate the bearish technical signal. If the sell-off continues, the next price target to watch is the 6,600 to 6,800 support zone that formed earlier this year.

Nasdaq Chart

The small cap Russell 2000 index broke below its uptrend line two weeks ago and tested the 1,475 support level this week. If the index breaks below the 1,425 to 1,475 support zone, it would give yet another bearish signal.

Russell 2000 Chart

As someone who is warning about a dangerous stock market bubble (please watch my presentation to learn more), this week’s technical breakdown really concerns me. The U.S. stock indices discussed in this piece would need to close back above their trendlines to negate this week’s breakdown. There is a very good chance that the sell-off will continue until U.S. stock indices hit their support zones at the early-2018 lows, then they will bounce for a time, and attempt to break below their support zones. If and when the indices eventually close below their support zones, that would give yet another bearish signal that would likely foreshadow a decline to their 2015 highs (not that the bear market will stop there, but it’s the next step after a break below the early-2018 lows).

We at Clarity Financial LLC, a registered investment advisory firm, specialize in preserving and growing investor wealth in times like these. If you are concerned about your financial future, click here to ask me a question and find out more.