Technical damage

Although the title of the post is technical damage in the sense that major trendlines have been violently broken on today’s selloff, today’s move is something that has been brewing for quite some time and certainly did not arrive without signs of warning.

As others have done in the last few weeks, we pointed out that clear bearish signals were appearing throughout the charts, signals that should have alerted traders to raise protective stops and to positionate more cautiously.

The divergence in money flow, the loss of momentum and the triple divergences on the stochastics have been resolved by the powerful move down today, move that could probably stimulate the appetite of dip buyers in the nex days or weeks.

One of the characteristics of bull markets, in fact, is that price corrections tend to be sharp and violent, but ultimately easily recoverable. In many European charts some support areas have already been reached, while in other charts price remain relatively far from zones where it makes sense for bulls can step in.

Despite technical levels, however, news awaited from Europe and the pending jobs numbers in the U.S. may easily put pressure on the markets and push down the price for the rest of the week. Most of the markets closed at the low of the day, at levels that are not sufficiently oversold to give dip buyers the confidence to step in, signalling that probably we are at the beginning of the correction that traders have been calling all the way up from December lows.

The updated charts with the reference levels we are watching are reported below.





Dow Jones I30

Nasdaq Composite

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