Two months into 2016 and the stock market is falling to fresh new downtrending lows.
Let’s take a quick look at the chart, note the new trend and highlight the key levels for planning and trading.
We’ll start with the Daily Chart of the S&P 500:
I highlighted the short-term Bear Flag (blue trendlines) to members this weekend – we’re seeing that exact movement right now.
Price spiked to a new collapse low in mid-January, rallied up into a Bear Flag pattern and broke down away from the 1,900 level (triggering an aggressive short-sell signal) lower.
We’ll see the Weekly Chart shortly but for now, note the ongoing downtrend and sell-swing price pathway (red highlight) on the Daily Chart above.
Objectively the US Stock Market is in a confirmed downtrend as evidenced by the series of lower price lows, lower price highs, and a bearish moving average orientation (structure).
Lower lows continue to be favored… and realized.
Here’s the Weekly Chart which opens the perspective to the floors of support targets below:
Starting with the Trend Structure, the “LL” on the chart above highlights the “Lower Low” in late 2015 that resulted in a “LH” or “Lower High” later in 2015.
Price swing “down away from” the 2,100 level toward 1,900 and then 1,800 which broke the mid-2015 low.
This resulted in an objective and official Trend Reversal from Up (technically sideways) to the new Downtrend.
That’s right – the US Stock Market is officially in a chart-based Downtrend.
While we can’t see it on the Daily Chart, we can see the lower support target near 1,800 (it’s the 200 week SMA).
The lower Weekly Bollinger band trades at 1,841 as well.
Should the sellers continue their campaign, the S&P 500(NYSEARCA:SPY) likely trades down toward the 1,800 level.
If in the near-term future, price breaks and holds under 1,800, then even lower downside projections will extend lower as the downtrend extends into the future.