Toni Hansen writes that the reaction to the Fed tends to come in three waves. There is the initial reaction, followed by a secondary and reverse reaction, and then another reversal back to the original direction.
Both the S&P 500 and Dow Jones Industrial Average are now more strongly testing their 20-month simple moving averages. Toni Hansen still thinks we'll see greater correction off them starting this week, but the intraday action remains more bearish.
The fact that the market broke down last week earlier than an ideal continuation, and that volume spiked on Thursday coming out of that sell-off, suggests that the market is oversold heading into Monday.
The market still looks weak going into Tuesday, but Toni Hansen would like to see some correction on the 15-minute charts before looking for strong intraday continuation setups in that direction.
The technical action is suggestive of a triangle formation beginning on the daily and weekly charts. So far, there is still a bit more of a bearish bias within the range.
Toni Hansen expects a continuation into the first hour or two of the day, or else a decent upside gap with continuation at the open, and then a correction from those highs ahead of the afternoon.
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