The new all-time highs of the stock market seem to be out of the question for a while. With today’s price action, the stock market flashes sell signal more and more. This could morph into a deeper correction (5% only, or in the worst-case scenario 10%) and we may see this market slide back to $3,966 as originally anticipated.
The market flashes sell, sell, sell
At first, we saw a significant recovery from the 50-day moving average but then today, everything changed again.
Here is why I think the market flashes the sell signal:
- We bounced down from a short-term consolidation resistance (the thin short, dark horizontal line that I marked on the chart as a flag that has morphed into a horizontal channel).
- We also bounced down off of the significant major upward trending trend line (the magenta thick line).
- We reached the midpoint of the new megaphone pattern and bounced down, confirming the megaphone pattern being still in play and having a significant downward pressure on the market
- We are creating lower highs (the blue circles).
All these levels and occurrences, if you will, are bearish. They all point to more selling. And there are significant pressures out there that can play against each other.
One is all the inflationary fears out there that push the market lower, but on the other hand, there is a lot of cash sitting on the sideline which, if deployed, can change everything again. But. And that is a big “but”. Even if we see a correction, that correction will be short-lived. Normally, in an inflationary environment, the stocks perform well and actually grow. But this is not much true for high flying growth stocks. These may suffer. Thus many stocks like CRISP, Tesla, NNDM, and others may be under a pressure, other stocks may actually go higher.
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