Damn. I should have listened more to the DJI weekly candles last week when they confirmed Dark Cloud Cover… But SPX and NDX were bullish… Perhaps I should make a note going forward as this is not the first time DJI speaks for and leads the whole market.
Anyway, the substance has hit the fan and the major indices closed with weekly candle formations that are difficult to imagine more bearish. Let’s listen to the candlespeak and put some perspectives on what could be ahead.
SPX formed a Tower Top by closing just a few pips below that last big green candle and below 8 EMA.
NDX made a bearish Engulfing, that typically does not require a confirmation. The odds of a next move down are very high.
DJIA: after confirming the Dark Cloud Cover last week, this week it completed a Three Black Crows, one of the strongest bearish continuation formations.
As you can see, the indices made the strongest bearish formations on the weekly frame and it is difficult to expect anything bullish to happen next week. The next week is crucial as the monthly candles will be formed on Tuesday and the chances of making them bearish remain high.
For a reference, this is the weekly candles for the volatility index $VIX. Today’s candle is more bullish than the one formed on February 2020. Does it mean we are at the beginning of a correction that is comparable by magnitude to the one in 2020? I don’t know. All I can say is that if the indices do not significantly recover in the next two trading days, the correction could take a few weeks and, possibly, months.
Yesterday I shared a perspective forecast for $FTSE. Today it closed the week very badly. It looks like it could lose a quarter of its cap in the next few weeks (if the formation was indeed a diagonal).
Does it mean that the US indices would experience something similar? Perhaps. Let’s see how November closes.
This post opens a regular series of the weekly analyses on VIX, DXY, SPX (detailed projection), gold, silver, GDX, oil, BTC and ETH that will be shared later this weekend.
If time allows – TSLA, MSFT, Market Pulse on cryptocurrencies and large cap stocks.
Most of them will be available for the subscribers only.
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