Today the Dow Jones Industrial Average opened lower, coming within 50 points of the May 6 “flash crash” low. The S&P 500 actually took out its low from May 6 (see chart).
When examining what happened on May 6, I wrote a blog detailing all the bearish factors in the equities market. The point being that all these factors were sitting there like oily rags in a garage waiting for a match. The bears were claiming a major top was in place and the bulls knew a significant correction was coming before markets could once again rally. Once the market turned down, presumably due to what was going on in Europe, that scenario was in place.
But I was curious as to what it meant technically so I asked my friend and Futures Magazine contributor Jeff Greenblatt (aka Fibonacciman) what it looked like technically. Jeff commented, “I found that in all cases, major indices and futures markets stopped going down in the right place implying there was universal symmetry.”
I took that to mean that while there may have been structural errors that led the indexes to fall exponentially in that crazy 15-minute period on May 6, they stopped roughly where they should have and where they approximately reached today. As noted previously, even the bulls were expecting a significantly correction, in the 10-12% range. It happened in an instant on May 6 and now it has been confirmed.
What is left to be determined is whether this was simply a correction or the start/resumption of a more significant bear move. I wonder what Fibonacciman thinks?