Anyone curious about what caused the 370-point drop this week can look no further than the adjacent chart. We are not surprised. Over the past several months the discord in the Modern family that started as minor bickering has broken out into a heated dispute. Equities are not happy when most family members are arguing and in depressed market phases.
The cause of the bickering stems from the debate on whether Trump will be able to execute or not. Obviously if he is impeached those best laid plans will never materialize. Today’s bounce after yesterday’s meltdown did little to calm things down among family members. Hence we are feeling defensive.
Here is the hard evidence:
Some of the bearish patterns as outlined above have been showing for an awhile but the catalyst to the big decline was that big jump in the impeachment odds. Once that subsided today, equites rallied but not with great conviction.
One must stay flexible so, for getting bullish, I’ll wait for a positive pattern such as IBB back above its 50-day MA, and either IWM or the Dow reclaiming their 50-day MA’s.
S&P 500 (SPY) Classic looking double top. Good news it closed above the 50 DMA which need to hold. Below 235.40 watch out below with support at 233.50 and then 225.
Russell 2000 (IWM) Confirmed phase change to warning, Will the 6-month calendar range low hold at 133.60? Close Above 138 would put things in a positive perspective
