 | Yesterday very negative session in the United States have brought my thoughts into reality. Today, the market gapped down, closed below the july high level and posted an 'evening star' pattern, which is a typical sign of market reversal. In a daily timeframe the price retraced to its first natural level of support, which is the 10-day moving average. Moreover, concerns about the housing market in America are still being revived, which in the shorter term may be supportive to the bears and cause further pullback. So, the first bearish candle indicating a correction has appeared three days later, than I had expected. If the global markets continue to get weaker, then we would probably see a test of this rising 20-day moving average and later even the rising trendline, which I plotted on a daily chart. These are the key levels of support for this timeframe, with trendline being the strongest (pulling back to it would post third in a row 1:1 correction). |
 | In a 5-minute timeframe, the market has violated its most recent level of support, which was this lower band of rectangle pattern. These potential levels of support, that I pointed out in the first paragraph can be much clearer to see in an intraday chart. 20-day MA value would be probably near the 50% retracement of this prior extended rally, which exceeded the all-time highs. Moreover, this possible support area is nothing else, but prior significant resistance, from which the actual breakthrough had started. This was pointed out in my earlier analysis, but now seems to be coming true. Trendline support (that I can't plot in intraday, but you can compare the charts) would be the 61,8% retracement, also being near to the 3700 gap support level. |
Is the long expected pullback finally coming? We are about to see in the upcoming days. The technicals suggest a short term trend reversal, but tommorrow we have this CPI data coming out. I'm not suggesting that it is going to be better than expected, but such news always cause volatility in the markets and might even reject a price reversal pattern, as it did in the previous cases.
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