How To Tell If Papa Bear Has Arrived

September 14, 2016

Today’s price action generated a distinctive pattern on the intraday charts with the potential to tell us whether the powerful selling we’ve see in recent days might be the beginning of a bear market. Notice how this morning’s follow-through to Friday’s steep plunge stopped almost precisely at the red line around mid-session. The line is a key ‘Hidden Pivot’ support at 2114.75, and if it were to be breached decisively — meaning by about six or seven points — that would strongly imply more downside is coming to at least 2073.50, the ‘D’ target of the pattern.

Alternatively, if the futures were to reverse upward now and surpass even minor peaks created by the downtrend, that would imply bulls are regaining their footing. Ironically, it would be bears goaded into short-covering who would be doing the bulls’ heavy lifting. As for their motivation for such urgent buying, it would come from the terrifying sight of a rally shredding even small pockets of supply. We won’t presume to know how things will turn out on Tuesday, but in any event, holding above 2114.75 will be critical. Most bearish of all would be a continuation of the downtrend and an easy penetration of the 2073.50 support. 

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