Stock Market Technical Analysis Blog
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In the market today they decided to start breaking the pivot we are at to the upside a day early starting a decent short squeeze upward until the QQQ hit the underside of its upper blue channel line which caused it to roll over and sell off into the bell (top right chart). At the same time, AAPL got turned back down at the lower line of its red channel (lower left chart).
In the bottom chart I have applied large moving averages that work well for intermediate term swings in the market. I mentioned yesterday that the market is at a large pivot point which is actually the intersection of the orange and brown lines above. What they are trying to do is repeat the layup they executed back in early July to take the market back up to the 8/2 peak. These large moving averages can take as many as 5 days to get a clear direction break which would give them a window to roughly next Thursday to make it happen. If they fail in pushing the orange line up from the brown line and instead the orange crosses down thru the brown we will likely begin the middle stage of the correction and possibly drop another 3-5%.
As of yesterday's open the correction from the 8/2 S&P high has produced a total fall of just under 5%. Also, yesterday morning's low clearly marks the end of the first leg down in a correction. It looks like they want that to be the only leg and are working to use this large moving average convergence to try to take the S&P back to the 1710 level.
One thing that also figures into the equation is that in early September the markets have a long running history of starting a clear and definitive move upward or downward regardless of how choppy and erratic the summer trading was. We now have the situation where next week's seasonal launch upward or downward starting point is coinciding with the intersection of these 2 moving averages. If all goes well, the month of September will look similar to the month of July. If they can't draw in enough buyers then they are not likely to sponsor an upward move on their own and another 3-5% drop will likely be in the cards.
Trade well my friends
Alan
