In this weekend’s market update I want highlight a few observations that crystalize a theme that has emerged in this market: It keeps repeating key structures and patterns as it’s fighting a battle for control and the outcome of this battle will ultimately determine everything.
Let’s start by taking note of some key developments in the last few weeks.
Firstly in July markets went on to break out toward the Sell Zone which we’ve identified as a potential key market pivot. As it turns out markets repeated precisely what they did last year: New highs were not sustained and the breakout has failed. Again.
Last week’s flush was actually quite intense, especially in the after-hours session on Monday. $ES ended up dropping 8% from the highs in a matter of a few days. This sort of bottom falling out should concern everyone about liquidity. Like in 2018 there was zero support built on the way up in June and July, price levels were simply sliced through before the oversold bounce emerged.
Note these markets have been acting in confines of very precise structures, channels and patterns and they keep repeating themselves. And we can see this in many index charts and products.
Here’s the $DJIA as an example:
And almost a like for like replay of the initial October correction which of course raises an important question: Will history repeat