Dow and S&P500 both bearish trend

Dow Jones Industrial Average: Trend is bearish but support is just around the corner

The Dow Jones Industrial Average (INDU Index) performed against our expectations and broke below our quoted support level at 8,213. While this also resultantly means that our forecasted 5-Wave Triangle consolidation pattern is no longer at play and that further downside should be forthcoming for the Dow as it rides on the current Wave 4, note that support which is just around the corner from present levels should serve to cap any additional downside. The bearish centreline crossover within the MACD chart is also painting a negative picture for the Dow.

Support at the 7,987 – 7,995 area is expected to be robust, as this is where the 61.8% fibonacci retracement of Wave 3 is seen. Furthermore, the 100-day moving average also resides in this region – we therefore expect this level to hold up against any further downside pressures. Resistance, on the other hand, is available at the 8,560 – 8,580 area where a series of daily highs are identified. Aggressive traders may try to buy a bounce off the support level to engage in some scalping.


S&P 500 Index: Further room to fall as compared to the Dow

More bearish than the Dow. Similar to the Dow, the 5-Wave Triangle Pattern that we have previously forecasted for the S&P 500 (SPX Index) is now invalid after price action during the previous week performed against our expectations. Note that, however, while the current Wave 4 is also expected to pull the S&P down, support to cap the potential bearishness is not available in the nearby vicinity as opposed to the Dow. The 14-day ADX that is moving upwards also signifies that the downtrend is picking up steam.

The S&P may continue to lose ground until the 847 – 851 support area where the 61.8% fibonacci retracement of Wave 3 and 100-day moving average is situated. Initial resistance, on the other hand, is seen at the 898 level where a series of daily highs are seen. Additional resistance is also available at the 927 – 931 range where another series of daily highs reside.

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