After five consecutive sharp down days, the S&P 500 finally had a strong up day yesterday. Is the decline over and was it a buy the dip opportunity, or is there still more room to the downside?
Personally, from my technical analysis standpoint, I think the rally now is more of a "dead cat bounce" -- just a temporary relief rally while some shorts cover their position before the downtrend resumes. Specifically, I'm watching the bottom trendline of the channel in the chart below, which will be around 2040-2050 in the coming weeks. I consider it reasonably probable that the market will touch those levels before a new wave of sell orders come in to initiate the next leg down that will send us below 1800.
Of course, if we reach the bottom trendline and close above it rather than declining, I think all bets are off: it may signal that there aren't enough new bears in the market, and that the bulls are clear to send price much higher.
What do you think?
Personally, from my technical analysis standpoint, I think the rally now is more of a "dead cat bounce" -- just a temporary relief rally while some shorts cover their position before the downtrend resumes. Specifically, I'm watching the bottom trendline of the channel in the chart below, which will be around 2040-2050 in the coming weeks. I consider it reasonably probable that the market will touch those levels before a new wave of sell orders come in to initiate the next leg down that will send us below 1800.
Of course, if we reach the bottom trendline and close above it rather than declining, I think all bets are off: it may signal that there aren't enough new bears in the market, and that the bulls are clear to send price much higher.
What do you think?
Are We Gearing Up for a Re-Test of the Trendline on the S&P 500?
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