The Dow retreat was large, but not unexpected. The retreat presented a buying opportunity, but not for a long-term uptrend continuation.
Dow trend weakness remains significant. This is confirmed both with chart analysis, and with some fundamental analysis. The Dow chart now has three significant chart patterns and they combine to limit the Dow rally in the short-term and the strength of the longer-term uptrend.
The first and new feature is the uptrend line starting from February 2016. This is the first anchor point. The second anchor point is the July low. The third anchor point is this week's collapse. The slope of this new trend line is different from the slope of the long-term uptrend line that started in October 2011. The result is an ascending or rising wedge pattern.
A rising wedge is a bearish pattern that signals a high probability that prices will collapse and head in a downward direction. The trend lines of this pattern converge, with both trend lines slanted in an upward direction. The price movement is bounded by the two converging trend lines. As the price moves towards the apex of the pattern, momentum is weakening. A move below the lower support is a reversal in the upward trend.
This wedge pattern develops within the context of two other patterns that are also not bullish.
The second feature is the well-established trading band. The lower edge of the trading band is near 15,600. The upper edge is near 18,300. The width of the trading band is measured and then projected upwards. This gives a target near 21,000 for the Dow. This is a long-term target. The Dow is making new highs but there are technical chart features which limit the way the Dow moves to achieve the 21,000 target.