Submitted by Nic Lenoir of ICAP
We are reaching the target levels we have been waiting for all week in equities to initiate shorts.
S&P futures traded at 1,070.5 We can see on the 180-minute chart that we have a clean a-b-c with c = a and a 61.8% retracement. Now we need to go break 1,026/1,029 to further accelerate and go test 943/875.
The Bovespa has a very similar structure, we have reached the 61.8% retracement in a-b-c with c=a as well.
The Dax, which has been one of our key indicators due to its very technically friendly trading patterns, has only retraced 38.2%, but the pattern there again is very clean. If anything if we turned here it would be very bearish. Originally we had thought we would possibly see 5,600, which would have been more in line with the size of the bounce observed in other markets.
Last we point out the Nasdaq, where we also have a 61.8% retracement. The market looks like it is drawing a H&S pattern, which means we could possibly see another 1/1.5% upside before turning. It is rare for a market to turn on a dime, so maybe more consolidation Monday and/or Tuesday is to be expected before the proper selling begins. After all Monday have been low volume and boring, so it would fit the profile.
Focus on the downside on 1,026/29 for the S&P future, the 100-dma for the Dax, and a close below 1,650 on the Nasdaq. A break below this level would confirm our favored scenario at the moment of further downside. We see 10% to 12% before the next support from here if the move is confirmed, which would mean for the Nasdaq to test the 1,510/1,565 zone at the minimum.
Good luck trading,