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The Market Has Spoken: Down Down Down
Today’s action defines the second point of the top line of a large double downtrend channel on the S&P. The downtrend in volume from the May top is being broken by increasing sell volume. We should expect to drop to at least the middle of the channel at 1050. With earnings season over, global growth slowing, and the negative market cycle of September-October almost upon us, we will in all likelihood head to the bottom of the channel at 1000.
Upon arrival that will activate the massive head and shoulders pattern that has been evolving on the S&P since Oct. 2009. The ultimate target of that pattern is 900 for the S&P and 9000 on the Dow. Now is an excellent time to buy put options on the major indices. In the event the market does rally above the upper down trend line, close out your positions for a small loss.
