Dow Jones - The Beginning of Another Correction?

DOW JONES - SELL SIGNAL


Today the Dow Jones had the biggest one day drop since the month of February when the last correction had begun. The Dow Jones gave us multiple SELL SIGNALS today, starting with the Dow Jones breaking below its 20 day MA since mid-February. Both the MACD and the Stochastic also gave us SELL SIGNALS today. The next couple of trading sessions should give us a clear picture of whether or not we are indeed starting a correction or if this is just a false SELL SIGNAL. My personal intuition tells me that this is indeed the beginning of another correction since January. Now if the Dow Jones does continue lower in the upcoming trading sessions and stays below the 20 day MA, the question is how low could it pull back to. By looking at the daily chart we can see around 5 significant support levels that may be tested in the upcoming weeks if the Dow Jones does indeed start a correction. The next significant support levels stand around 10800, 10700 (50 day MA), 10500, 10400, and 10300. I think it is very likely that we will see the Dow Jones pullback at least to its 50 day MA and I wouldn't be surprised to see it break lower as it did in January. If the 50 day MA is broken, I think there is a very strong potential of seeing the Dow Jones pull back as low as 10300. A move below 10300 could send the Dow Jones back towards its 200 day MA around 10100, and a break below this level would be very very bearish, however I think this is very unlikely. With all that being said I think the Dow Jones could have a correction of around -7%. Another important secondary chart which is important to monitor is the Stochastic which as the Dow Jones moved higher we saw the Stochastic trend between approximately 75 and 95 despite giving minor SELL SIGNALS along the way. If the Stochastic does fall sharply lower below 75, I think this will be just another affirmation that we are in a correction. As things stand right now, we are getting SELL SIGNALS and we await to see if we can get a confirmation in the upcoming trading sessions. Right now I strongly advise to not take any long positions as many people may mistakenly see today's big down move as a buying opportunity. This could be true if the Dow Jones bounces back strongly higher from here, however it would be foolish and too risky to take long positions today. If the Dow Jones does continue lower as I expect it to do, you should consider exiting your long positions if you haven't already and move towards taking short positions.