Well the market answered our question last week and it fell. In fact it had lost 372 points closing the week with a new two week low.
The sideways channel that we had been stuck in has now been breached to the downside and this may now be providing a clue as to the near-term future. If we continue to see lower prices this week then it could quite easily turn nasty for the Dow Jones.
After a break below the key level of 12200 Shorts were initiated and further breaks below the recent lows of 12156 and also 12069 are now considered a Bearish pattern for the coming weeks.
We have some key time cycles converging on 7th, 14th and 21st March which have in the past provided significant moves in the markets. If this year also follows suit then a tradable bounce is not far off.
The downside target of 11395 I have talked about for several weeks may come into play if the W3 low of 11634 is taken out.
Notice that the Sell Signal provided by the RSI has also given traders a nice payoff with swift downside movements. Markets can remain overbought and oversold for lengthy periods and although it appears we are currently oversold, the correct play is to be shorting the rallies as the trend is still down.
Unless we break above 12350, I would consider the index to remain in a downtrend unless and when the market itself provides us with a key reversal pattern.