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The May correction was technically well advertised in April, even before that, but the run in April stretching to new highs on $SPX and $NDX was a tricky exercise to navigate through. Extremes become more extremes as I outlined in my 2018 market lessons.
The wedge patterns I outlined in advance finally met their end with downside breaks bringing us the May correction highlighting again that technicals matter. The wedge mattered. The weekly hanging man mattered. The trend breaks mattered.
And yes historic technical extensions mattered:
That deviation having gone from most positive ever to now negative:
Divergences - Highs - II
Also mattering: The negative divergences highlighted in Lying Highs II.
All of these factors have now resulted in a technical reaction that produced a retrace to not only the daily 200MA yesterday, but also the critically important weekly 50MA, another key support pivot:
MAs - Bears - Bulls
See a sustained close below these MAs and bears may be devouring bulls.
After all this H&S pattern is triggered and it has a 2640 target and bulls need to step it up here today & tomorrow into the end of May and invalidate this pattern now that we’ve seen a break of the neckline:
Concerns - Suggest - Markets - Topping - Patterns
So let’s be very clear there are numerous critical technical concerns that very much suggest markets may be engaged in major topping patterns, the Wyckoff pattern I outlined on May 1 right near the top is still fully valid at this stage, and the ghost chart is casting a long shadow here as well. With the combined backdrop of an escalating trade war, yield curve inversions, slowing growth, trapped central banks and a toxic political climate there’s a lot that can seriously wrong for bulls here, a macro and technicals backdrop that is paving the path to intervention.
But navigating markets is a complex exercise that requires an open mind to the other side...
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