Market Overview For the Week of 1/11/16-1/15/16
Hey Traders! So we saw the market see some wild swings this week following the big red candle for last week. The DJIA started off the week strong with two solid green days which showed some hope of a potential reversal, however the bears took over and pulled the market lower on Wednesday before seeing a rally Thursday and ultimately getting crushed down today (Friday) to push both the DJIA and S&P 500 to new weekly lows. The start of 2016 has not been ideal with the DJIA currently down 1417.4 points and the S&P 500 down over 157.71 points. The bears, as it stands now, are in complete control to start off 2016.
There are some key support levels that we as traders need to be aware of. Solid breaks below these levels could signal that we are entering a longer term bear market for 2016. Those levels will be labeled on the chart below. As many of you are aware, I've been mentioning for some time how I believe the US markets are built on stilts and a bear market was not too far off. Much of it has to do with how the Federal Reserve deals with interest rates going forward. A rapid increase in rates will damage the markets significantly and bring them back to earth from the bubble that has been created. Is that time now? There is no way of knowing for sure. What we can do however is work to spot key support levels that, if broken, should signal a bear market. Remember, the market never falls straight down or rises straight up. Eventually we will enter a trend with peaks and valleys. I expect to see a market rally topside within the next 7-10 market days. How high that rally goes and how long it lasts will determine if we are in a shorter term bear market. If we fail to set a higher high, then come down and set a lower low on the chart, we will effectively be in a solid downtrend to start 2016. As I mentioned previously, both the chart for the DJIA and SPX are below with support/resistance levels labeled along with a few notes. If you have any questions, let me know! Have a great weekend!