In yesterday’s post featuring a weekly chart of the Dow (and an oh so distinguished gentleman) we noted among other things a double top that has formed. Let’s dial that in to a daily chart of the S&P 500 and use Rich Ross’s view as a starting point.
The Stock Market Is Tanking. Here’s How Low It Could Go.
I met Rich a decade ago at the late Jon Auerbach’s shop in Manhattan. Nice guy with nice charts. This is not one of those derisive ‘Man stares at chart…’ bits (although that clown show is out there just waiting to enthrall you with the mysterious things they see in their charts).
It’s a mighty important one, though, technicians say. “The S&P absolutely must in no uncertain terms hold ‘3,200’ to avoid generating a Double Top sell signal which would force me to rethink everything,” writes Evercore ISI’s Rich Ross.
Here is daily SPX showing support at 3200, which would hold an all important higher low if Rich is to avoid a re-think. But the problem was the lack of a higher high as we’ve noted in NFTRH the last 2 weeks. That was a bearish caveat (along with a terribly over-done sentiment profile) to the market’s bullish trend.
I’ve drawn in a lower channel line to go with the upper one and you know what? This could still be okay, technically. If that is a downtrend channel forming it would be a consolidation style correction in time and to a lesser degree, price. This pig needs a test of the SMA 200, which is biased toward rising.
So I am going to stay open minded. The lower high signaled caution. A lower low, while not a good thing, may not be as bad as some may fear after it all shakes out.
As a separate issue, when will SPX (and its US headline index fellows) address all those daily chart gaps way down below? Will it address those gaps? I suppose they could have been breakaway gaps piled one on top of the other as the market put on its afterburners to get the hell out of the crash doldrums and reestablish the daily chart trends.
Regardless, behold the moral hazard your Federal Reserve and your government have built with the man-made reflation rally. If they don’t keep it going, this thing is toast. If they do keep it going it is still subject to corrections along the way to the inflationary future.
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