It is evident that today the market rejected the rally at the resistance. The bulls battle may still not be lost, we may be experiencing a pause after yesterday’s strong rally. The market bounced from the support line of a declining wedge and rallied hard. Probably too hard. We would prefer an incremental increase over time than what we have seen yesterday:
Now, bears have an upper hand. If bulls who bought into the yesterday’s rally join bears, we may see another leg down. However, the chart above is a futures’ chart, if we look at SPY or SPX, we see a gap:
It is quite possible that we will go lower to close that gap and bounce up again. The markets had a 4.2% pullback so far so nothing too bad yet. But it may get worse. Definitely, we need to be prepared for the possibility of further decline unless today’s price action was just a pause. We will see tomorrow, however, Friday’s are typically weak days in declin9ing markets, so it is possible that we will go lower.
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