Sometimes the markets telegraph a key level or future target level in pre-market or post-market trading. Other times these telegraphed price targets happen during regular trading hours, explains charting expert Chris Vermeulen, chief market strategist at Technical Traders.
Recently, the Dow Jones E-Mini Futures Contracts (YM) generated two unique high price levels near $30,000 over the span of about 6 trading days.
My research team and I believe this “telegraphed high price target level” is a warning of major resistance for traders. These types of broad market patterns are not very common on charts.
They happen sometimes, but very rarely like this example on the YM chart below. This Double Top (Tweezers) pattern may be warning that the $30,000 level on the YM could become a major market peak/turning point.
Additionally, the post election rally reached this $30,000 level on the day Pfizer announced the vaccine data, then sold off quite consistently throughout the regular trading session.
Obviously, traders are attempting to redeploy capital into sectors they believe present real opportunities for growth and appreciation.
As we can see from the chart below, the Dow Jones and Mid-Cap sectors appear to be the leading sectors at the moment. We’re not calling for a major top in the market based on this pattern (yet). We are just bringing it to your attention so you can be aware of the resistance level that appears to have setup near 30,000 on the YM.
The market could blow through this 30,000 level and continue to rally higher or it could stall near the 30,000 level and retrace lower.
Given the situation with the US election and the surging COVID-19 cases throughout the world, it doesn’t take much of an imagination to consider another shutdown related market decline setting up.
My team believes the US stock market entered a depreciation phase in mid-2018 and the current rally in the markets (2019 till now) is an excess phase “blow off” rally in the works.
If our research is correct, we expect the excess phase to end at some point in the near future, setting up a broad market correction and/or broad sideways rotation.