After three terrific days of weakness (last Thursday, Friday, and then Monday) it can certainly be argued that the bulls are going to mount a counter-offensive. I offer the charts below which speak to this probability.
First is the Dow Jones Composite, whose low Monday perfectly tagged the supporting trendline. I think this trendline will get broken, perhaps even before the year is out, but a bounce seems logical.
An identical argument an be made for NASDAQ. I pointed out, weeks ago, the channel on the NASDAQ. I’d say we’ve fulfilled that prophecy quite cleanly.
The “froth” has been blown off the top of the semiconductor space, so some brief strength here would obviously help fuel a tech bounce.
The principal index, the S&P 500, also got within spitting distance of its support, with a channel quite similar to the NASDAQ’s. Let me be clear: I do think the highs are in, and the support will break, but I also think our bull friends are going to do a counter-strike here and now.
The bears made some pretty good progress on small cap damage, since the supporting trendline we dinged pretty badly. My view on this is that the lower lows/lower highs will continue to rule the day.
As for energy, by way of the oil and gas index, I would like to point out that the XOI uptrend has, in fact, finally been broken. Counter-trend bounce be damned, this speaks to weaker prices ahead.
