Are you a bull who’s holding your breath, hoping that the selling will abate? If top technical analyst Abigail Doolittle is right, it’s not time exhale.
Doolittle tells us charts still signal trouble, despite Wednesday’s bounce.
The S&P closed Tuesday below its 50-day moving average, about 1370, for the first time since December. Not only should 1370 have been support but during the rebound it generated resistance, though bulls were able to push above that level in afternoon trade.
“Now watch 1385,” Doolittle tells us.
Her proprietary research suggests that’s a key level – “it’s the difference between a descending trend channel and a bull pennant,” she tells us. That’s complicated but the analysis is actually quite simple.
“If the S&P can climb above 1385 there’s a good chance it will trade back up into a sideways trend – sending it to 1420,” Doolittle explains. However, if the market can not make its way above 1385 – the more likely scenario according to Doolittle - then there’s more selling to come.
“Below 1385 and the S&P would be making a bearish consolidation – if that's the case then it should drop down to 1340. And if that doesn’t hold, we’re looking at a big bearish mess.”