After The 800pt Crash In The Dow…

After The 800pt Crash In The Dow…

Wow, what a turn in one day. But you have to ask yourself where does money go for safety? It’s a hectic day after this deep drop so we need to watch the numbers and see what the market is telling us.

Think Globally...

Rates are going up. Bonds don’t reward you when rates go higher. Ok what about… real estate, well rates are going up and it’s getting harder to get loans. So that’s not going to work. So what about emerging markets (like Europe, Japan, China). Europe is a disaster as quantitative easing is failing (so expect a Euro crash) and no one is buying Europe debt. Actually, they are are buying their own bonds/debt to keep their economy from doom!

News blaming it on rising interest rates. Rising interest rates historically has been fantastic for the markets and the US Dollar. Plus, interest rates been rising since 2015… did people just notice it getting higher now?

US Elections are important as the markets are telling us. If there is a democratic victory in November it will certainly hinder the confidence in the market. This is due to historical social programs and rising taxes by the left. When taxes are lowered, people earn more… period.

But… lets even if we have a worse case scenario, elections are won by democrats. Capital will still seek safety… as US Equities appear to be less of the ugly sisters the prince has to marry. Again… they can’t go into bonds with rising interest rates. But you still will have a Saudi Prince whose father tells him to diversify and he will load up on bonds. You will also have bankers sell out their customers into bonds for legal reasons too. But smart/big money, will not! Even worse case… the market will not be dead.

No Isolated Highs… Bull Run Is By No Means Over Yet!

From what I gathered, when the market gets an isolated high… this is likely a crash scenario. Energy ran out and no recovery. But lets look at all 3 markets in US, keep in mind they are NOT isolated highs. In fact, we have three indexes peaking at a different months. August – September – October.

 

Looking At The DOW JONES

Lets review the Dow Above:

  • We are re-testing that high… it’s not isolated
  • The more we re-touch resistance… the more bullish (4 touches is max before breakout)
  • We EXCEEDED August high during October 3rd, yet failing to get thru overhead resistance
  • This means its a highly volatile market (a hard one to trade), focusing on Oct/Nov

What to Watch On The Dow:

  • Monthly closing BELOW 23995 to signal a serious correction
  • Weekly closing ABOVE 25806 on 10/12 signals RALLY into next target
  • This Weeks Support (10/12) is 25045
  • Directional Change Tomorrow (10/11)… then watch next target is Monday 10/15
  • Holding todays(10/10) low (25598.74) tomorrow(10/11) implies a bounce
  • Pay attention to 10/11 opening!

 

Looking At The NASDAQ

 

Lets review the NASDAQ Above:

  • We made new high in August
  • We DID NOT exceed August high, this indicates an Oct/Nov low
  • We elected weekly bearish on Friday 10/5 warning sharp decline likely

What To Watch:

  • Closing below 708400 on 10/12 warns looking at sharp decline to test monthly bearish
  • Monthly bearish is 690000 zone, this will need to hold by Oct 28th close if 708400 is elected
  • 10/10 week is Direction change, this causes concern (Volitility is high)
  • Next turning point is 10/22, followed by 11/05 (Maybe a Whipsaw can occur)
  • Close on 10/12 ABOVE 718370, this weeks low could hold and UP into 10/22
  • Then Re-Test lows into the elections

 

Looking At The S&P 500

 

Lets review the S&P 500 Above:

  • We made new high in September (between Dow & Nasdaq)
  • We EXCEEDED January high, but remain in the uptrend channel
  • We elected weekly bearish on Friday 10/5 warning sharp decline likely

What To Watch:

  • Closing ABOVE 2681 on 10/12 warns we could bounce up
  • But we have technical resistance at 2795 (need to really break above this area)
  • We have technical support at 2768 & 2635
  • Closing ABOVE 2851 will signal STRONG BOUNCE LIKELY
  • DAILY BULLISH is 2921

 

In Summary For DOW:

  • There is NO isolated highs in any of the 3 US markets (Bull Run is NOT OVER)
  • DOW: 10/11 is a daily directional change — if DOW holds 10/10 low, we’re bouncing up into 10/15
  • DOW: Watch the opening… it’s important to see if we hold and bounce
  • DOW: 23995 need to close above at end of October to avoid larger dip

In Summary For NASDAQ:

  • We’re expecting Oct/Nov low, because August high was not exceeded
  • Close weekly on 10/12 ABOVE 718370, this weeks low could hold and UP into 10/22
  • Then down to re-test support into elections
  • Close weekly on 10/12 BELOW 708400, then sharp decline to test monthly bearish 690000

In Summary For S&P500:

  • We exceeded January high and dropped into Uptrend channel
  • Closing ABOVE 2681 on 10/12 warns we could bounce up
  • S&P may look to bounce as well

 

What it all comes down to is November after the elections. This will give us much more certainty what to expect into 2019. But we are still bullish and this a nasty consolidation period of big dips and rally’s. But once we go above the consolidation period, the longer we consolidate the larger the move with more energy. So this is building energy.

REMEMBER: We need the majority to be bearish to keep going higher!

 

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