Did Snowflake Mark The Top Of This Market

By | September 17, 2020

There is always an event that we look back and say, “Yes, that marked the top.” The much celebrated Snowflake initial public offering may be such an event. It may not be a long term top but the charts suggest we could see a significant pullback.

Take a look at the seven month charts of the Dow Jones Industrial Average and the S&P 500 Index. The rally has been underscored by a strong uptrend line. Over the last two week that support has been tested and appears to be giving way under the pressure.

If we zoom in on this chart we see that the price action over the last two weeks looks somewhat like a bear flag pattern. Also, yesterday’s candle on the industrial average formed a gravestone doji. That candle opens near the low of the day and explores higher levels and ends the day closing back on the low. The implications are clear an inability to hold those higher levels.

The 50 day moving average just below current levels could supply support. If this slide lower picks up speed, however, a deeper reversion possibly to the 150 day moving average would be a more likely target. That would represent about a 10% decline.

Take a look at some of the big technology names:

Apple (AAPL) has formed a bear flag pattern.

Amazon (AMZN) has broken its 50 dma and is testing support.

As solid a performer as Microsoft (MSFT) has broken below its 50 dma and formed a bearish engulfing candle on the daily chart.

The technology sector started this current market decline and there is no indication it has slowed down.

The stage is set for a meaningful pullback. It remains to be seen, of course, at what levels the sellers feel comfortable becoming buyers again.

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