Not to add to your bearishness, but ... Dow Industrials' reversal from Fibonacci level may have larger significance

I don't want to make any of my readers unnecessarily bearish - I just do want to point out the significance of the levels we're seeing the markets react to today. If you've kept up with our analysis across the charts of various indices, indicators and time frames, you know that today marks a potentially very significant day reversing from significant Fibonacci levels. The VIX looks to be reversing up from a key .786 retrace that I've been pointing to for weeks, and the Dow Industrials look to be doing the same as I posted this morning. You can also see on the monthly chart of the Dow Industrials, below, that this index may be getting important resistance at its 200-month moving average. We saw the Dow Transports having done the same, and even moved above that key moving average to re-test Fibonacci levels that we've been looking at for some time here. (I've added my Dow Transports monthly Fibonacci chart for reference, below.) Reversals by the Dow Industrials and the Dow Transports can be very significant from these levels. I know intellectually that it is premature to think about whether these indices will re-test their March lows, or instead move to higher "B" wave or "wave 2" levels. After all, we need to see confirmation in the form of equity markets moving lower over the coming days first.

But from a trading perspective, a loss of the key 200-month moving average can spell trouble in the charts. In addition, my weekly chart of the S&P 500 looks like that index may have encountered trendline resistance. My channel trendlines are not as detailed nor using the same exacting methods that Andre Gratian uses, but it's evident that there can be a trendline resistance for the SPX here. Note also that I didn't mark all the likely Fibonacci retrace lines on my SPX chart - it was already getting rather busy! But there are some additional ones, including the .382 retrace to the approximately 1250/1260 level that I've begun to think may have more importance than previously recognized.

The Dow Industrials being so close to their 200-day moving average with this potential reversal, doesn't look great either. Many will be looking to see whether or not the DJIA index will get support at or above its 50-day moving average. The large volume yesterday on the move up, might be interpreted bullishly as big volume on an up day. However, a skeptic would counter that it may have been a capitulation blowoff. Once again, confirmation by followthrough to the downside is what bears will be looking for. But it isn't difficult to think that may happen, because the Dow Industrials and Transports (and apparently other indices) have seen today's price already drop under yesterday's lows. That's looking like a bearish engulfing bar in the candlesticks, especially since these indices spiked above yesterday's high at the open this morning. Closing on the lows - if we see it this afternoon - doesn't help either, as part of the bearish engulfing bar.

Dow Theory looks to the levels of the Dow Industrials and the Dow Transports . That analytical approach is currently looking to whether or not these indices can move above their January highs. That hasn't happened, which is another reason why a reversal from this retrace level can have larger implications.