With the US Stock Market closed for a national holiday to mourn the passing of former President Bush, it gives a pause to reflect on the epic sell-off yesterday. Previously we forecasted a traditional Santa Claus rally for stocks. However, in light of the impressive selling pressure placed on stocks, we need to re-examine the current technical analysis for stocks. The first ominous sign is that the S&P 500 index reached a double top, causing speculators to go short. Secondly the force and volume of the sell-off will cause long term investors to think twice about going long into the light volume trading of the holidays. The manic tweets coming out from President Trump about the brewing tariff war with China does nothing to ease the current climate of investor uncertainty. Therefore it is our estimation that the first leg of the 1-2 wave structure is complete, with further declines and short-covering rallies in the coming weeks but ultimately the trend should be to the downside.
