US stock markets unable to beat multi-year trendline resistance
The E-mini Dow Jones has been in a very strong bull trend since 2009 as well you know. In fact, since Trump won the US election in November, the market has rallied from a low of 17,418 up to 22,132. This makes an impressive gain of 4714 points or 27% for investors in just nine months.
In the monthly chart below you can see how the six-year trendline resistance is causing problems for bulls in such an overbought market.
One can certainly argue that we are overdue a correction, with only one month of small losses over that ten-month period.
If we zoom into the weekly chart below, there are a couple of minor negative candles. The market peaks at 22,132 in the second week of August, but closed that week lower. In fact it was over 150 points lower to leave a reversal candle.
In the following week the recovery only reached 22,067, unable to test that all-time high from the previous week at 22,132. Again the market closed over 150 points lower to leave a second negative candle. These minor negative signals at six-year trendline resistance could be signalling an overdue correction ahead.
In the E-mini Nasdaq monthly chart below you can see how the rally is now being held by the five-year trendline resistance.
In the weekly chart we see how the E-mini Nasdaq topped a couple of weeks before the Emini Dow Jones. Again, a small series of negative candles formed. However, this week we are seeing a strong recovery back to the trendline. In order to clear the trendline, bulls will need to sustain a monthly close tonight above the high of 5995.75.
Probably the most important US stock market of all is the S&P 500. In the monthly E-mini S&P chart below you can see how we have been unable to break the six-year trendline. This goes back to the end of 2011.
Again, a significant negative candle formed on the weekly chart at the all-time high in the middle of August. This raises concerns of an imminent correction.
The new all-time high at 2488.50 was followed by a swift sell-off of over 35 points by the end of the week. The sell-off more than took out the gains of the previous three weeks. In the week following we tried a recovery, but only made it up to 2474 before closing the week lower again.
I think these are strong enough arguments for a small correction in US stock markets. I’m not arguing for a significant downturn or a crash. Not yet anyway. But a move of 3-to-5% lower from where we are now would not be a surprise.
Technical Analyst & Trader
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