Is This The Start of Long-Awaited Downswing?

Since the correction on the global markets started on the 20^th of March, sellers were trying many times to initiate another leg down. They had many occasions, different patterns, many broken supports, many respected resistances and nothing…until Tuesday. On Tuesday, sellers performed a decisive raid on a crucial long-term support.

SP500 created a beautiful head and shoulders pattern. On Tuesday, the price managed to break the neckline and on Wednesday, the price tested the broken support as a resistance. According to the price action rules, that is a confirmation of a forthcoming bearish movement.

A similar setup can be obviously found on the DAX, as those two instruments are currently extremely correlated. Here, we will focus on the short-term situation, where we do have three nice correction patterns. We had two pennants, which resulted with a drop and currently we do have a descending triangle pattern, which is having a bearish breakout as we speak. With all this together with the long-term situation (similar to the one on the SP500), we should see a further slide.

Interestingly, GBPUSD is having the same long-term setup as both indices mentioned above. There was a huge slide and then a correction, which ended with a head and shoulders pattern. We already broke the neckline and tested that as a resistance. After this test, the price went lower giving us a pure long-term sell signal.