Stocks managed their third session higher on Thursday, June 27, and it's now too late to jump on that move. Major indexes and leading stocks have rebounded into resistance along with a few key moving averages. The next one to three days favor a pause or pullback at the very least, simply because of the selling momentum and multiple resistance levels being tested. It is only natural for traders and investors to pull some money off the table or short at these levels.
Stepping back seven days and looking at the overall stock market, my firm has seen a substantial drop in prices across the board. A ton of stocks have formed their first impulse thrust to the downside, which is typically what happens when a stock market is in a topping process (Stage 3 Distribution). The type of damage we have seen cannot be fixed overnight. This will be a process if it is to resolve to the upside ,and price action will remain wild (volatile).
The odds from a technical analysis standpoint -- using price, momentum, cycles, volume, and moving averages -- point to lower prices still to come. Actually, they point to another 5% drop from the current level.
Major Points to Be Aware Of:
The 20-day simple moving average is crossing below the 50-day SMA. The last time this took place, it triggered a 5% drop in the S&P 500
Price has bounced for three consecutive days. This typically puts the odds in favor of a pullback.
Price bounced and hit its head on the 20-day and 50-day moving averages on Thursday (RESISTANCE).
Market time cycles are in a decline phase, meaning that there will be a negative bias, and sellers will be actively pulling price lower on bounces.
The major long-term chart looks favorable for a bear market to start; this bear market may last 12 months. If so, this is just the beginning of some scary yet highly profitable potential trades in the coming year. Stocks fall three to seven times faster than they rise.
Daily S&P 500 Trend and Analysis Chart:
Long-Term S&P 500 Trend Chart:
Bearish S&P 500 Price and Volume – 60-Minute Intraday Chart:
Looking at these charts from a long-term, intermediate, and short-term basis, the odds are favoring lower prices. Being short stocks or buying inverse ETFs is the current play for the market. But analysis and trends are subject to change depending on price and volume action each week. Do not get your heart set on the big picture outlook of a year-long sell-off. That could prove to be dangerous. We take this market one bar or candlestick at a time and trade based on current short-term analysis.
Editor's Note: Chris Vermeulen offers more content at his sites, TheGoldAndOilGuy.com and Traders Video Playbook.
No positions in stocks mentioned.
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