US Equities Imminent Minor? Decline Before Recovery
My Technical Analysis:
I have been fairly bearish on equities since slightly after the recent highs but before the massive declines which made headlines around the globe. I have been anticipating more bearish action, and suggesting that the current counter-trend is merely a pause before the carnage continues. During the process of planning to purchase put options to profit from the potential decline, I decided to analyze the chart technically to determine targets and time periods. I have tentatively selected out-of-the-money ETF puts since they offer capital protection and leverage while also taking advantage of an increase in volatility, which will certainly occur if this forecast is correct.
As we can see, there are 2 major formations on said chart. The first is a symmetric triangle formed by the rapid price action. The second is a rising wedge, and likely signifies continuation of the triangle trend. I consulted the literature of measuring techniques to determine price targets, and said targets are much less than I would have projected mentally, minus the full symmetrical triangle target which may or may not be fulfilled.
It is interesting to note that other averages, specifically the S&P500 and the Nasdaq, are running into strong overhead resistance, although they appear to have broken upwards out of their respective patterns. This occurred previously as well, where these averages appeared to break upwards out of triangles only to print false moves before the "real" break down. The Dow has not suffered these types of false moves, and has been the only average preventing me from going long on a longer-term trade. It has been printing technically accurate patterns, and thus I am using it for my analysis although I favor the S&P 500.
The most interesting conclusion for me as a result of conducting this analysis was the fact that while the market may decline, it is likely to stop at the longer-term trend line and wedge targets. In short, essentially there is a plethora of support around Dow 2350. A further decline is possible but not yet technically likely. I consulted additional sources to query fundamental factors and other chartists' views for a more complete picture and to ensure I was not missing something major.
Others' Technical Analysis
This article shows how equities have been holding key technical levels and volatility has been subsiding.
Apple may be printing a diamond reversal (and it is a major component of all US indices) It is still in the speculative phase
Others' Fundamental Analysis
I like to also look at the fundamental factors to determine whether any market setback is likely to be temporary or more extensive and long-lasting. My initial impression was that the fundamentals were strong. I went over to Seeking Alpha to read analysis to get a fuller picture.
-This article makes good points for bullish continuation from a sentiment standpoint
-This article maintains that prices are inflated from a historical standpoint based on various criteria
-Robert Shiller says he sees more downside, and US is still the most expensive market in the world
-This article claims stocks are fairly valued to cheap. However, forward PE chart shows decently high prices
I have been fairly bearish on equities since slightly after the recent highs but before the massive declines which made headlines around the globe. I have been anticipating more bearish action, and suggesting that the current counter-trend is merely a pause before the carnage continues. During the process of planning to purchase put options to profit from the potential decline, I decided to analyze the chart technically to determine targets and time periods. I have tentatively selected out-of-the-money ETF puts since they offer capital protection and leverage while also taking advantage of an increase in volatility, which will certainly occur if this forecast is correct.
As we can see, there are 2 major formations on said chart. The first is a symmetric triangle formed by the rapid price action. The second is a rising wedge, and likely signifies continuation of the triangle trend. I consulted the literature of measuring techniques to determine price targets, and said targets are much less than I would have projected mentally, minus the full symmetrical triangle target which may or may not be fulfilled.
It is interesting to note that other averages, specifically the S&P500 and the Nasdaq, are running into strong overhead resistance, although they appear to have broken upwards out of their respective patterns. This occurred previously as well, where these averages appeared to break upwards out of triangles only to print false moves before the "real" break down. The Dow has not suffered these types of false moves, and has been the only average preventing me from going long on a longer-term trade. It has been printing technically accurate patterns, and thus I am using it for my analysis although I favor the S&P 500.
The most interesting conclusion for me as a result of conducting this analysis was the fact that while the market may decline, it is likely to stop at the longer-term trend line and wedge targets. In short, essentially there is a plethora of support around Dow 2350. A further decline is possible but not yet technically likely. I consulted additional sources to query fundamental factors and other chartists' views for a more complete picture and to ensure I was not missing something major.
Others' Technical Analysis
This article shows how equities have been holding key technical levels and volatility has been subsiding.
Apple may be printing a diamond reversal (and it is a major component of all US indices) It is still in the speculative phase
Others' Fundamental Analysis
I like to also look at the fundamental factors to determine whether any market setback is likely to be temporary or more extensive and long-lasting. My initial impression was that the fundamentals were strong. I went over to Seeking Alpha to read analysis to get a fuller picture.
-This article makes good points for bullish continuation from a sentiment standpoint
-This article maintains that prices are inflated from a historical standpoint based on various criteria
-Robert Shiller says he sees more downside, and US is still the most expensive market in the world
-This article claims stocks are fairly valued to cheap. However, forward PE chart shows decently high prices
Comment:
Apple has successfully printed a diamond reversal. US equities have also broken important levels to the downside.
Comment:
It appears we are entering the recovery and new all time highs phase