Lowering Expectations on Intervening Rallies
Purely from a technical perspective, last week's price plunge indicates that significant near-term technical damage was inflicted on the heretofore dominant Mar-Jan uptrend (as viewed in the accompanying S&P 500 chart), and that additional price weakness should be expected into the beginning of February. Furthermore, my intermediate-term cycle work is poised to create headwinds into the end of Q1.
This means that we must manage (lower) our expectations about the strength and sustainability of any and all rallies that emerge between now and March.
Let's notice that last week's nosedive sliced beneath 1) the near-term uptrend; 2) the 20 and 50 DMA's; 3) the lower Bollinger Band line; and 4) is threatening to violate all of the reaction lows (support) between mid-Nov and mid-Dec at 1085-1083, which is just above the next significant trendline (Aug-Jan), now at 1080.
At this time, my near-term pattern and momentum work indicate that we should expect pressure into the end of this week (with an intervening relief rally some time in the Tues-Thur time period).