$INDU - Weekly Bearish Rising Wedge Pattern $SPY $SPX $ES_F $QQQQ
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The linear scale weekly chart of DOW Jones Industrial Average shows its bearish wedge clearly. It shows the old neckline resistance we could not reach. There are many clues on this chart which make it significantly bearish. Most of the major indexes have recently switched to bear mode after seriously losing their mojo.
We can see that the rally last year was on ever declining volume. Fewer and fewer buyers showed up after the collapse last spring. Volumes remained well below the 21 week moving average (blue line) during most of the rally. The last three weeks, we’ve experienced heavier then normal selling pressures.
We have crashed through horizontal support indicated by the red rectangle formation like a hot knife through butter. This is not healthy and indicates a steep reversal could take place — picking up momentum to the downside. The RSI, MACD and Slow STO have all rolled over - a very bearish combination. The Histogram on the MACD has turned negative after its slow decline over the entire rally. Not a good sign. Where has all the momo gone? What is that big sucking sound you hear?
The steeper the incline of a bearish ascending wedge the more brutal the fall. Basically, there is not much in the way of support to stop the selling up here in our opinion. Price objectives (PO) are never slam dunks. The PO of a good bearish rising wedge is a complete retrace all the way back to the beginning of the wedge - typically a cascading type of crash over many months in this case if it played out. Remember: this is only a possibility, but be on guard. Most will totally discount this scenario and that’s another reason we like it.
Our Conclusion: Sell the rallies. The bulls are trapped.
Sidenote: We laid out our conclusions earlier here. Today GDX closed below its 200 day moving average on significant selling. It was a bearish engulfing candlestick on the daily chart. It’s deeply oversold. Our conclusion remains that these stocks are leading the market.
