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Stock markets ready to collapse?

Jason Sen
Stock markets have seen a good bounce from the lows in the first half of February. The E-mini S&P 500 recovered almost 260 points from a low of 2530. There is a good chance we are seeing the start of a medium-term bear trend after making a recovery high of 2789/90. This was followed by a break of the two-week upwards trendline to test the short-term 23.6% Fibonacci support at 2691/89.
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If this is the start of a bear trend, as I suspect, a break below 2685 targets quite important support on the daily chart at 2675/73. A break below 2670 acts as a longer-term sell signal. We are likely to test important 200-day moving average and 11-month trendline support at 2560/50. A break below 2525 acts as another very important longer-term sell signal and confirms a longer-term bear trend.
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E-mini Dow Jones reached a peak of 25813 on the bounce last week. It then sold off quickly to the two-week trendline and 38.2% Fibonacci support at 24870/860. Although we bottomed exactly here as I write, it does look like we are starting a bear trend.
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A break below 24800 therefore serves as further negative confirmation targeting the 24500/400 support area. While this may hold initially, a break below 16-month trendline support at 24240/24220 eventually acts as an important sell signal. This would likely re-test the February correction low at 23100/088.
The DAX 30 looks very much like it has started a bear trend, unable to make a significant bounce after the early February correction. In fact we fell at the second Fibonacci hurdle of 12550.
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We have been holding below the red 200-day and blue 100-day moving averages ever since. This is always a negative signal. Watch for a re-test of the 11900 level with a break below to act as an important longer-term sell signal. A break below the 100-week moving average at 11700 acts as the next sell signal.
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Note how we have short-term negative confirmation from the break of two-week trendline support at 12450 and 23.6% Fibonacci support at 12300.
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The FTSE 100 took a hammering from mid-January, losing almost 900 points. It bottomed, however, exactly at the 38.2% Fibonacci support at 6870/60.
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A relatively slow three-week bounce saw a 50% recovery take us back to the 7300 area. This coincided nicely with the 11-month trendline you see in the daily chart below. We topped exactly here to signal the bear trend is in place and this is more than just a bull trend correction now. Note how we got nowhere near the blue 100-day and red 200-day moving averages.
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If we start to hold below the green 500-day moving average at 7035 in the days ahead, this will act as further negative confirmation. Of course a break below the longer term 38.2% Fibonacci support at 6870/60 acts as another sell signal. This would initially target 6800/6790 and 6730.
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Jason Sen

Technical Analyst & Trader
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The content of this article is the personal opinion of the author and not InterTrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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