Indices Are Up But It Looks Like Just a Small Correction

Monday was really brutal for stock traders. Major indices collapsed breaking crucial mid and long-term supports. On Tuesday, buyers can catch a small breath but from the technical point of view they are still far behind. Today, indices may be going higher but price action says that this is just a typical movement of the broken support being tested as the closest resistance.

Lets take a look at SP500 which yesterday managed to break the 3420 support that was with us since the beginning of September. Today, we are testing this as a resistance and the test is so far positive for the sellers as the H4 candle is shapped like a shooting star (so far), that indicated a rejection and a further drop.

Lets move on to DAX, where the situation is even worse. The price created a giant head and shoulders pattern and managed to break its neckline. Here, bulls are even to weak for a test of this neckline and the price is simply sliding down. As long as we stay below the neckline, the sentiment is negative.

Another instrument, where the sentiment is negative is USDJPY, where in addition to this, recent movements are very technical. We are in a downtrend, where we had two major corrections. Both of them were flags and both of them resulted with the breakout to the downside and drop. The latest signal is pretty fresh, so the movements still have a lot of potential.

For a look at all of today’s economic events, check out our economic calendar.