Why the markets are going back down: my technical perspective

While trading I often use stocktwits (more on that to come) to get a pulse on the overall trading community.  I see a lot of traders wondering why stocks are going down these days as the news is seemingly not as bad as it could be.  Although I sometimes try to answer them from my personal technical perspective I thought I’d make a post on my blog about it for all to see.

Note:  Please click on the charts to enlarge them as they cannot fully fit on the screen in this format

So here we go:

Looking at the latest rally off of the march lows we notice that the MACD histogram on the weekly charts was consistently going up until about mid may.

As we can see the MACD histogram indicating a reversal from mid may

As we can see the MACD histogram indicating a reversal from mid may

At this point, this technical indicator shows the rally’s upward acceleration fizzing out.  Which indicates to me a correction coming.

Here we see the march trend having a false breakout and then a confirmed breakout

Here we see the march trend having a false breakout and then a confirmed breakout

In the chart above we can clearly see at the first arrow the March trend having a false breakout to the low side right when the weekly MACD histogram reversed.  Only to be confirmed at the second arrow.  The third arrow shows a further indication of a downward movement by looking at the directional movement indicator where the DM- line (red) shows that the bears have taken control of the market and the ADX line (purple) is rising to indicate a downward trend forming.

Possible Head and Shoulder formation

Possible Head and Shoulder formation

On this chart we clearly see a possible head and shoulder formation.  As of today we are right at the support which might indicate the possible bounce off the neckline perhaps to S&P 900 area and then a heavy decline after that.

I'm looking for the Weekly MACD histogram to cross over for a confirmed downward trend

I'm looking for the Weekly MACD histogram to cross over for a confirmed downward trend

And at this final chart we see the MACD histogram on the weekly chart indicating a possible cross over to the downside and the price levels right at support.  I am preparing some short positions for the day that this happens, I predict we will see some strong red shoots downwards.

Here we see the last 5 times the MACD histogram indicated a downward push on the weekly charts

And here on this final chart we see that the last 5 times the MACD histogram indicated downward movement it was the beginning and continuation of a nice downward trend.

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One Response to Why the markets are going back down: my technical perspective

  1. Curt says:

    I’ll be checking back often to see how this works out for you. I can see that lots of thought and effort is going into this. Good luck.

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