As I expected, we saw a pull back this morning at the open, but it did not turn at the upper trend line drawn in the 39 Minute Chart Instead the Dow entered a fairly regimented 2% sell-off, moving precisely to the lower trend line I drew yesterday. It then stopped and reversed – almost as if it were a solid line. The question is, What about tomorrow? Technically, the end of the market day created a consolidation at lows, which is bearish. However, we are also sitting right above a support level. So the technical read is somewhat ambiguous. Fortunately, the ranges are narrow so it won’t take long to find out. In any case, a break of 25,000 down will warrant extreme caution and portend further downside movement.
The Daily Chart continues to show the wide consolidation, suggesting a continuation move to 27,600 this week. In the absence of additional negative news, we could then break the wide range and move on to 29,500. It’s difficult to imagine it can do that in this uncertain market. Indeed, new fears regarding the resurgence of the coronavirus could provide the tipping point to a new market correction. Watch 25,000 down.
I mentioned yesterday that “recent days have been eerily quiet – the calm before the storm.” Is this the start of a storm? It could be. There is certainly a higher level of concern about the coronavirus. After today’s move, we are now within striking distance of the critical 24,750 support level. But until that line is broken, the range between 25,000 and 27,600 is operable. In the absence of negative news, the market should ramble around in that zone. Market participants will be watching this and the other levels – and reacting to them.