Bloodbath Looks Imminent – Full Defensive Mode…

Monday, June 3, 2019
By Paul Martin

By: Clive Maund
Sunday, 2 June 2019

The market is now in position to crash. This is not something that will arrive as “a bolt out of the blue” – it has been setting up to do this for a long time. On the 6-month chart for the Dow Jones Industrials below we can see that on Friday it broke down from a Head-and-Shoulders top that had been forming since February, and the longer-term 5-year chart for the S&P500 index lower down the page makes clear that a giant top started to form with the January 2018 peak, which means that it has been setting up for a bearmarket for fully 16 months now.

A few weeks back we had spotted the H&S top forming but we weren’t sure whether a symmetrical Right Shoulder to complete the pattern would develop, which would have it holding up for perhaps another month, but by last week it had become clear that it would likely settle for a shorter stunted Right Shoulder, which is why we decided to “put our best foot forward” and go for both inverse ETFs, and selected Puts. In the event this is what happened and the breakdown on Friday beneath “last ditch” support means that it is likely to crash next week.

What very often happens when markets crash is that key support is breached on a Friday, after which traders have the weekend to brood about it and many decide to hit the sell button the following Monday, and a near tsunami of sell orders hits the market at once forcing a steep self-feeding decline. That is what looks set to happen this Monday.

The Rest…HERE

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