Thursday, February 16, 2012

How Long Will Today's Stock Market Sell-Off Last?

It looks like 55-day long channels may finally be ready to break down. There were quite a few bearish intra-day reversals today among the recent market leaders: AAPL, NDX, COMP, XLK, XLF, XHB and many more. DJT has broken below the rising wedge with multiple confirmation closes. SOX has backtested the break of the uptrend and got rejected. It has diverged from NDX since close on 2/9/2012. There are multiple open gaps below on stock index futures charts, which may need to be filled. It has been a parabolic move from the beginning of the year.

click on chart to enlarge
But while the bears will be celebrating today's development, the bulls will be preparing their full forces to defend the support levels. It is important to note that while Nasdaq 100 (market leader) may look overextended to the upside, the 5th wave of the rally from March of 2009 may continue for some time. Look at the carbon copy of two sections on the following chart (highlighted in light blue). It is possible that after the sell-off which probably started today, there will be a lot more upside left. Charts have a tendency to repeat...

click on chart to enlarge

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