Let’s have a look at DOW after yesterday’s steep, -831 pts or -3.15% fall.
The strong break of 55 day EMA, coupled with bearish divergence condition in daily MACD, is significantly raising the chance that it’s now in medium term reversal. From price structure point of view, there was also a beautiful wave four triangle from 26616.71 to 23997.21, followed by a short impulse wave five from 23997.21 to 26951.81. Unless DOW could get back above 55 day EMA quickly, otherwise, risk is now heavily on the downside.
So how far could DOW fall to? If we take a less bearish view, it’s just correcting the uptrend from 2016 low at 15450.56 to 26951.81. Then, first support is 55 week EMA (now at 24531.54). Defending this support will keep the medium term intact and invalidate the above mentioned medium term reversal case. However, firm break there should at least send DOW back to 38.2% retracement of 15450.56 to 26951.81 at 22558.33 before bottoming.
