Now why this is significant: (Fundamentally)This has now I think been the final "Nail in the coffin" so to speak for the bulls. I think that they will be very wary to push that hard and I feel that any negative news/earnings from any of the big players will have huge implications on the market, although now everyone will also have their expectations lower.
Now onto the technicals, here's the chart:
So again from last week I mentioned that in 07 the Dow had formed a H&S top formation with the neckline shown in blue (currently crossing at 12,500). The nice thing about this neckline is that we finished again this week below the neckline thus keeping the H&S intact. The levels of support and resistance are shown in orange with resistance at 12,750 and support at 11,750. Furthermore in purple a trendline could be drawn from the lower lows (and the neckline shows the lower highs). The RSI has still shown negative divergencies.
The ADX has shown that the chart is still trending but that the - has shown some bullish convergence with the +. but formed a bearish cross in mid December of last year (as shown in the circle). The MACD has just had a bullish cross near the oversold area but probably will not go very high because of the big red candle we formed today.
Where we go from here:
It still looks as if we still have to retest 11,750 and frankly from a fundamental point of view I don't see how we don't go lower and how we will get past 12,750 in the near-term.
Look to re-test 11,750 and if it holds and see if we can re-test 12,750. If 11,750 doesn't hold we could be in for a longer "bottom" then what a lot of the talking heads think
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