by Clive Maund, via GoldSeek:
The stockmarket is toxic! It’s very important that you don’t get seduced by the old siren song of Wall St about “buying the dip” and other nonsense like “being selective”. While these strategies have worked up to now, they won’t any longer, because we are now in a bearmarket, and furthermore it looks like we are on the verge of another plunge.
The past few weeks have been momentous. The stockmarket has finally broken down from the huge bearish Rising Wedge that we had delineated many months ago, as shown on the 8-year chart for the S&P500 index below. The validity and importance of this Wedge is amply demonstrated by the fact that after the index broke down from it, it plunged.
There’s an old saying that “they don’t ring a bell at the top”. Oh really? – they do if you are able to hear it. Witness the chart posted on clivemaund.com a week or so before it turned lower and proceeded to break down and plunge…
We had also correctly identified and delineated a massive Distribution Dome forming in the S&P500 index and how the market was topping out at the apex of the Dome during the Summer. The market is now breaking lower, but don’t make the mistake of thinking that it will rally back to the Dome boundary again – it won’t because markets drop twice as fast as they go up, due to fear being a stronger emotion than greed. Before leaving this chart note that we have seen the first bearish moving average cross for 4 years, and volume on the recent plunge was the heaviest for 4 years, which is also bearish.
Now we turn to shorter-term charts to see what’s likely to happen next. On the 3-month chart for the S&P500 index we see that the bearmarket phase kicked off with a super-bearish “4 Black Crows” candlestick pattern. Although this pattern is very bearish indeed, by the time the 4th crow has completed the market is obviously heavily oversold and in need of a breather – hence the bounceback and congestion pattern of the past 2 weeks, which most unfortunately for the bulls, looks like a bear Pennant. Although this Pennant may take a little longer to complete so that we have to adjust its boundaries somewhat, action in recent days suggests that the market will break lower again imminently into another plunge probably of similar magnitude to the 1st, and possibly worse, as the penny finally drops amongst the mob that this is not just a dip but something far worse.
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