What follows the Dow's sharp drop?

By Julian Yosovitch July 27, 2015 • Reprints http://www.futuresmag.com/2015/07/27/what-follows-dows-sharp-drop#.VbaPnUF4ybk.twitter

Sharp drop for the Dow

After its last fall, the Dow Jones index market has left a weekly bearish signal. Meanwhile, the 200-day moving average has broken and such technical arguments leave the market vulnerable to extend its weaknesses toward lower areas pointing back below the actual lows of 17,500 points. We now expect an attack on 17,000 points as next short-term support level for the Dow.

In the case where the selloff increases below 17,000, we will be on alert for continuity in the bearish movement towards 16800-16700, and then more depressed front values.

Given the downward key and the lack of upward trend in the recovery, we believe that as long as the Dow doesn’t cancel such bearish signals, we will remain cautious.

Only with a break above the 18,150-18,300 zone, will the bearish reversal key remain neglected and we would expect the bullish rally to continue in the direction of more ambitious hikes.

In recent years, the market has shown that the bears have a very tiny role in terms of time and market, and they cannot generate significant adjustment and therefore the investor should not only monitor the mentioned supports levels, but also the resistance that will cancel the bearish signal.  Then, with the break of those levels, we will postpone any move lower and would expect additional upside to higher areas.