The DJ30 is having a bad week. Counting today, it has been sold for four out of the five days of the week. This has been enough to get traders worried about what is ahead. Is the market signaling a correction?
Many traders will also be asking what are the chances of the current top becoming a double top? It looks like it has all the technical ingredients for it to happen.
Double top often signals the start of a bear market. Traders can typically expect the price to drop double the distance of the double top retracement. If this double top is to consolidate and behave like a proper double top, then we will see a price drop to the range of 13700 – 13603. That will be a massive fall and definitively it will create a great opportunity to re-enter the market.
But what fundamentals reason does the market has to turn not only bearish but to go that low? The market definitively doesn’t need much reason than an overbought state, but it is also entering a period when typically the market is sold out. Another superficial reason but factual nonetheless, is that every 2000 points or so, that the market goes up from the previous height, it goes down into correction.
An answer to the previous question could also be another question. What is the market correcting from? Where we in a bull market? It didn’t feel like it. Has the Fed bubble burst? Usually the market goes into a correction when a bubble burst, but is it there another bubble beside the Fed bubble which is set to continue growing?
There could also be too many questions mark to this recovery and not many answers. Financial firms have been the main benefactors behind this recovery, and as far as rumors go around, they are all heavily investing in the US market and waiting for Europe to turn around in one or two years.