Next week? Prediction is difficult especially about the future....

Next week? Prediction is difficult especially about the future. (Marious people are credited with this "advice"_)

Here's a chart. (What else does a chartist do but present a chart?)


The macro geopolitical picture: The market is going down. Why? Well, heck, it's bleedingly obvious that all hell has broken out in the Middle East. Israel and Iran are hell bent on destroying each other. Currently, Israel seems to be doing the better. But, no end seems to be in sight. That's going to play havoc with the price of oil. That's bearish for stocks.

The technical picture: first, the MACD Histogram shows a big negative divergence. That's not always a great timing device, but a treat warning signal that momentum has been lost. Momentum has to be lost before stocks go down. Secondly, Williams%R is now at its lowest level since 15 April, just after the low in the bear market March/April. That backs up the warning given by the MACD Histogram divernce.

So, with got a war and technical signals saying the market is going down.

How far? Anybody's guess? I suppose a random guess might be as good as any. But, being "rational" people, we try to bring some rational thinking to bear on the matter.

Last week's range is a good starting point. Above the high of last week - further upside. Below last week's low - further downside.

Applying a box to last week's range, and using a Fibonnaci retracement tool, we get the following support levels:

!. Low of last week on the STW chart: 77.06. That seems certain to fail
2. 161.8% of last week's range gives us support at 76.2. That's opposite a congestion zone. That seems to be a possibility if a quick resolution occurs in the Israel/Iran war. A quick resolution seems unlikely. That level is, however, just above the Point of Control of the Volume Profile. So we might get a pause at that level. Point of control is at 76.00
3. 261.8% retracement of last week's range gives a figure of 75.00. That might be reasonable if warring parties come to their senses.
4. 423.8% retracement of last week's range gives a figure of 73.1.
5. After that - any-body's guess - mine would be the April low of 64.59.

So here's some supports from results of a bit of dodgy maths and suspect assumptions:

1. 77.06. Unlikely
2. 75.2. Unlikely
3. 76. Possible pause point before further declines.
4. 75. Possible low.
5. 73.1. Probable.
6. 64.59. Full retracement of bull market rally.

If that fails - locate the position of the nearest Salvation Army Free Bread Distribution Outpost.

Take care.
RB.