It’s a brutal market with no sign of let up (for now). Because of the spike in the VIX and large selling volume (when seen together are signs of a short-term bottom) a short-term rally is expected. But with algorithm and HFT trading and the BIG money away for the holidays, oversold can get more oversold which is exactly what we are seeing.

As investors we would all love to know when the decline will end but unfortunately, we will only know that in hindsight. What I have done is layered some technical analysis targets onto US index chart in an attempt to come up with downside pattern targets just for perspective. The bottom line is its highly likely the markets are not done falling.  

Targets for all chart indexes are labeled “T1”

Dow Jones Industrials

SP500 -

Nasdaq -

Small Caps -

It’s always good to remind everyone here, once again, that markets go up and down, not up or down. I expect we will get at least one more rally before we find a final bottom, whenever and wherever that turns out to be. When we do put in a final low, coming out of it will not be a straight path like the one down has been. Consolidation and basing will be required to rid the market of the remaining sellers before a new uptrend is established.

Keep in mind, the targets are nothing more than possibilities. In strong downtrends, markets tend to overshoot their targets so it would not be unexpected to find an end to this correction well below the pattern target. This is not a prediction but rather keeping our minds open to the possibilities to adjust our expectations.  Just so we are on the same page, what we want to see is a continued correction and the further the decline the better. No, I am not nuts.. This would set us up for a much more attractive future investment opportunity. The bigger the drop, the bigger the opportunity. Are you onboard?