The major indices have faltered several times this year, but this most recent slump seems to be the beginning of something more severe.
First, the basics. The white trend line, which goes back over a year, had held as support during previous downturns this year, but not this time. In fact, it's now became resistance. Also influencing sellers is the 200dsma at 2765, reinforced by the 50% retracement of this recent decline at 2772. More importantly, the 50dsma is aligned with the 61.8% retracement of the same move, so that's an extra layer of resistance at 2812-2820.
We also put in a minor double top, but it's not strong enough to pose a threat to a bullish advance (if that happens). Speaking of bullish, I see two things that are bullish to a degree... first, the MACD has signaled to buy (yellow circle). Second, we have a bullish divergence in the R.S.I. (yellow trend line).
However, I can't help but notice that volume is accelerating on the down days, and we're slicing thru supports like they don't exist, so it makes me more cautious than usual. In fact, I think we're headed back to the lows set earlier this year at 2533, and I even think there's a good chance we extend on down to the 127.2% extension at 2422 (which coincides with major support at 2404).
In short, I'm raising cash, taking profits, hedging with puts and selling covered calls against my core holdings. This could get nasty pretty quick, so consider yourself warned!
First, the basics. The white trend line, which goes back over a year, had held as support during previous downturns this year, but not this time. In fact, it's now became resistance. Also influencing sellers is the 200dsma at 2765, reinforced by the 50% retracement of this recent decline at 2772. More importantly, the 50dsma is aligned with the 61.8% retracement of the same move, so that's an extra layer of resistance at 2812-2820.
We also put in a minor double top, but it's not strong enough to pose a threat to a bullish advance (if that happens). Speaking of bullish, I see two things that are bullish to a degree... first, the MACD has signaled to buy (yellow circle). Second, we have a bullish divergence in the R.S.I. (yellow trend line).
However, I can't help but notice that volume is accelerating on the down days, and we're slicing thru supports like they don't exist, so it makes me more cautious than usual. In fact, I think we're headed back to the lows set earlier this year at 2533, and I even think there's a good chance we extend on down to the 127.2% extension at 2422 (which coincides with major support at 2404).
In short, I'm raising cash, taking profits, hedging with puts and selling covered calls against my core holdings. This could get nasty pretty quick, so consider yourself warned!