Yesterday, everyone was panicking about the inevitable recession, today, after we received jobless claims showing more people asking for unemployment support, everyone was no longer afraid of a recession, and the markets erased yesterday’s losses. This is a type of market that is hard to predict and expect. And subsequently hard to trade.
At least, we can be relieved for a moment seeing the market reclaiming the support that was lost yesterday. We are back above the 50% Fib. But will it hold?
The chart below shows the cloud that provides more room for decline (the market can decline to the red cloud line and still be positive, though it would have a negative effect on future price action).
The problem is that we are in the cloud, and there is no decisive action to move above it, but the most concerning action is that the blue line crossed (sharply) below the red line and that is never a good sign, even in this choppy market. This happened only once in recent history (in December 2021), and the blue line was hugging the red line, then briefly moved above it and, after two months, crossed back down, and the bear market developed. Today, we see the blue line sharply down.
Although the trend forecasting indicates a choppy day with some positive upward-moving trend, I do not think this will happen. Yes, we may see the last day of the 2022 rally, but the price is set to collapse. Will it be tomorrow? Or early next year? Even the WVAP line on the chart above is sharply down, which is a line that doesn’t reverse easily either. All this points to more selling to come.
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