The screen capture above from Stops and Targets lays out the big picture. The Top Spotter at 2878.50 on January 29th was confirmed on a close under 2851.50 on January 30th. Short-term trend flipped bearish under 2825.50, which has changed the Multitrend Rating to BEAR 1.
Next major support is at the rising intermediate stop/reverse line and there is short-term support at 2698
click image to enlarge
The daily bar/range chart above helps to illustrate what Stops and Targets sees, but I have added a couple of other elements to help visualize the big picture…
The green shaded zone shows the range for January (last monthly bar) and the yellow zone shows last week’s range, which is helpful to visualize where the stops are resting. So far, this has just been a short-term pullback. Even though it probably feels like a big deal, a correction has been long overdue.
The unknown presently is where the selling will stop and when buyers will come in. So, let’s take a look at that from the perspective of an old reliable friend here… the amazing Weekly Bar Paradigm that has been in place since 2009 (note the line on the chart above at 2736.50)…
click image to enlarge
The chart above shows weekly bars with each 4 bar pivot high and low marked by small red or green dots. What we are interested in are the four-bar pivot lows. The last one that was built was way back at 2416.75 in August of 2017. That line is marked on the chart above with a blue line. This market has been on a tear since then and so it is highly unlikely that we will get a pullback to a stop sweep/reversal under that line–but for the first time since then…we are getting a pullback here that achieves the minimum depth to make contact with the bottom of the dotted green channel. That channel plots the lowest low of the past 4 weeks and that channel bottom is currently at 2736.50…which is why I marked it on the daily bar/range chart above. Under that target at 2736.50 is the zone where a new four-bar pivot low can eventually form and we are officially there with the low at 2733.
There is no need for me to go back through again this for long-time readers, but for newer followers of this blog just enter ‘paradigm’ in the search box to catch up on past descriptions of this amazing tool that I have been pointing out in real-time here for many years. We have another potential setup this morning–and so here I am pointing it out. The paradigm works by pointing out stop sweep/reversals under the most recent pivot low. First we need a new higher pivot low and if we get that–then we start to watch for the next setup many weeks down the road, which would be the stop sweep/reversal under the new higher pivot low. The last stop sweep/reversal was on election night at point number 9 on the chart above.
So, head’s up right here and let’s see what happens around this lower channel as we watch for a potential bounce.