Today's drop did a lot of technical damage to the market. The above chart of the XAO shows three clear negative impacts:- the market closed below the 200-Day Moving Average, often taken by analysts as the dividing line between bull and bear markets
- the MACD closed below its signal line
- W%R is below its mid-line.
A close by the RSI below 50 would be conclusive (if that is needed). It is only marginally above 50 today.
For three weeks I've been saying I'm cautious about this market. During that time, the market has trended sideways.
Today's action seems to have broken below that sideways consolidation. The break is currently a marginal break, but volatility has picked up and the market seems destined to head downwards.
There's a lot of other evidence I look at that is more esoteric than the above picture, but is also more suggestive of further downside. Some of that I'll be including in my weekend report.
Be careful
Red
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