Last week has been the worst week for the markets. Is this the start of a BEAR market or a Correction? Let's take a look at various charts to understand where we stand! Can we identify potential market direction? BPNYA well below EMA(30) while volatility ($VIX) has managed to move above 20 mark. However, volatility has not yet spiked violently which would signify panic. This appears to be a controlled selling rather than panic selling, hence the market drop are gradual. Daily NYSE chart clearly suggests that market has dropped consecutively for past several days and has been possibly stretched for now, hence a bounce can be expected. Weekly NYSE chart is decisively bearish as market is breaking down supports, next support is near 9000 followed by 8500 area. RSI is very close to being oversold but yet above 30 mark. NYUD has managed to stay below EMA(21) after June of 2015 suggesting market peak was behind us. Take a look at below NYSE McClellan Summation Index chart, this is a cumulative chart. As soon as NYSI line goes below EMA(59) its time to be very cautious as market tends to go into correction. It is a breadth indicator based on Net Advances (advancing issues less declining issues). Based on charts, it appears that path of least resistance is on downside. Market can drop further in weeks ahead as global weakness is evident. We speculate another 8-10% drop before this correction is over. This entire episode might take next 3-6 months to unfold, expect high volatility during this period.
What does it mean for our Investments?
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