The Channel Breakdown and Projected Support

By | August 23, 2015

(Goodbye Trading Range – We’ll Miss You)

We finally got what so many wanted for so long – a “healthy” correction. The pundits say that corrections are good things and that we should welcome and embrace them. I hate those guys. A large percentage of the “correction” happened in one week, and while it may turn out to be healthy over time, the velocity of the declines in the last several trading sessions has been scary.

88824.INdex charts

The trading ranges that the major market indices have been in were broken on Thursday, as we noted here and here, along with every other technician in the world.

88824. S&Pcharts

A break below the rising support line of a small triangle pattern on the S&P 500 chart on Thursday, precipitated a sharp move downward which penetrated the support line of the larger channel trading range, and the decline continued without hesitation in Friday’s heavy volume session. A target projection for the channel breakdown is measured by taking the height of the channel and subtracting it from the support line. It projects to the 1950 area, and I think many traders and investors, at this point, would welcome some consolidation and basing at that slightly lower level.

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