The S&P 500 Index (SPCFD) is in a similar situation as the Dow Jones Industrial Average (DJI), breaking down below support for the first time after hitting an all-time high.
We have multiple signals to look at here... Please allow me to entertain you for a few minutes.
We have a rising wedge. This is a classic on these charts. When the wedge breaks down, we have a retrace that leads to the test of EMA50, EMA100 and finally EMA300 (gray). The first level to test is EMA50 (2947.6), small bounce if it holds and then EMA100 (blue) is tested.
Bearish divergence is showing on both the MACD And RSI. This is normal when a drop is coming after a new all-time high (ATH).
We thought the fed rates cuts were going to push the markets higher, up, but instead it is still the end of this run.
We don't believe that the fed rate cut caused this drop, instead this was something necessary and it must happen as the market has been overbought for years. The USA president did a great job but there is no stopping what has been building up for years in these charts.
Looks like we just retraced from EMA100 up to EMA50. Holding breath to see if this is where we reverse direction and plunge towards EMA300.
allenbrubaker
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Love your analysis @alanmasters. I sold half my short position at EMA100 (orange) at the end of the day. My guess is we will retrace back up to EMA50 (blue) until we resume our fall down to EMA300. What do you think will happen given the substantial drop today?
AlanSantana
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@allenbrubaker, I believe it will move past EMA300 after the bounce because of the strength of the drop.
Thanks for sharing.
allenbrubaker
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@alanmasters, Yes I totally agree that it will move far beyond EMA300, but I guess I was asking where you think the bounce will occur if any at all. My guess was a small bounce from EMA100 -> EMA50 -> EMA300+, but due to the magnitude of this most recent drop, my confidence in there even being a bounce at all is wavering.