Stock Market Pullback or Bear Market Correction? (Moment of Truth Part II)

Chris Kimble
stock market major top chart analysis august 2019

Stock Market Indexes Topping?

Well, that was fast. The stock market pullback has been sharp and likely is not over yet.

Last week, I shared the same chart, calling it a “moment of truth” for the stock market. Would the 3 underperforming stock market indexes (in the lower half of the chart) bring down the outperforming 3 indexes (in the upper half).

Dow Jones Industrial Average INDEXDJX: .DJI, S&P 500 Index INDEXSP: .INX, Nasdaq 100 INDEXNASDAQ: NDX versus the Russell 2000, Dow Transportation Index, and S&P Mid-Cap Index.

So far, the answer is yes. Well, at least the under-performers have helped to bring about a sharp pullback.

BUT the question now is: Will the underperfomers drag the broader market into a correction… or perhaps a bear market?

Let’s look closer at the chart above.

As you can see, each of stock market indexes in the upper and lower half are testing critical up-trend support at (3). Bulls need these price areas to hold.

If support at each (3) breaks, bearish messages will be sent after small, mid and transports sent a bearish divergence message of late.

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