What a week! The US market had its biggest drop since August last year. And according to my charts, it seems that this is only the beginning. We should get at least 2 waves down and we haven’t even completed the first down wave so this is going to be big.
I believe support for this first down wave should start to come in around 1,280 on S&P futures. We are just 10 points from that so I believe we should get a bounce sometime next week. It’s going to get a lot more volatile and exciting as the roller coaster gains speed.
The second wave should bring us down to around 1,150.
On the Dow index, there’s a broadening wedge. This chart pattern indicates increasing volatility and usually does not end well. We may see a bounce to test the bottom of the trendline of the wedge at around 12580 but we are definitely going be end the month much lower than where we currently are now.
Daily chart of the VIX
Volatility had been increasing rapidly over the past few weeks. And as my trading buddy Chris had mentioned, we had begun a new volatility cycle sometime last month. And we should see increased volatility in the markets over the next 3 months.
Daily chart for Gold
We had gold bounce off support at 1,546 last Thursday. I believe we should see gold test this support again within a week or two before beginning a new rally.