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Another Week, Another Bearish Gap: Down Jones, S&P 500, Oil

ByAlpari Research & Analysis
AuthorTomasz Wisniewski
Published 03/23/2020, 06:37 AM
Updated 05/14/2017, 06:45 AM

The last full week of trading in March starts with bearish gaps on major futures markets around the globe. This isn’t a surprise at all if we consider how last week ended – buyers had a chance for a reversal but failed to do so and now, they are going to pay the price for this.

Let’s start with the Dow Jones, where I would like to show you one of the most powerful price setups – a false breakout. Last week, the price was drawing a pennant, which ended with a breakout to the upside. That breakout gave us a buy signal but after making a mild upswing, buyers surrendered and the price reversed. That was a false bullish breakout. It created a situation, where buyers abandoned the sinking ship and new sellers entered the market, encouraged by the bullish catastrophe. That pushed the price lower and allowed it to set new corona crash lows.

If you are wondering how deep we can go with this, let's take a look at the monthly chart of the S&P 500 chart. The price is slowly approaching 2015 highs of 2100 points. It seems like a good target. Speaking of a good target, don’t forget the 50% retracement of the 10-year long bull market, which is slightly above the psychological level of 2000 points. I think it’s reasonable to expect that the price will get there during this bear market.

Last but not least is oil, where traders confirmed one of the most important principles of the price action – broken supports are tested as new resistances. That was the case of the 28 USD/bbl. which was confirmed as resistance on Friday. That allowed the price to fall another leg down, which is currently threatening the support on the 20 USD/bbl. It seems that the bullish nightmare isn’t over yet.

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