Has the Decline in the Equity Markets Begun?

The equity market decline that I have been anticipating for the past couple of months may have begun. While markets typically don’t go straight up or straight down, it’s my view that we’ve seen the peak in the major US stock market indexes for the near term.

Take a look at the S&P 500 chart below. Note not only the significant decline but also the recent break below the support line represented by the blue line that I drew on the chart. While I expect that there is a good chance of a short term rebound in the markets, I believe that the trend in the market is down and will likely remain that way for awhile.

The long term uptrend line from the market bottom in March has also now been broken to the down side confirming this position.

For those of you unfamiliar with trend following indicators, they attempt to identify and exploit price patterns and trends in financial markets.

While the longer term trend following indicators I use are still mildly bullish, short term indicators are indicating that the market trend is down.

I expect the long term indicators to follow suit at the end of this month based on what I see now.

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The use of trend following indicators to determine market direction and price patterns is not 100% accurate. The information provided is education in nature and, therefore, is not intended to constitute investment advice and should not be interpreted as a recommendation to purchase, sell or hold a particular security. Prior to making any investment decision, the services of an appropriate professional should be sought as investment related recommendations are dependent upon the personal situation of each individual investor. Investing in market related securities involves a risk of principal loss.