Bull channels usually evolve into trading ranges. It is also close to a measured move target. This is especially true since the selloff has had several sell climaxes big bear bars followed by small bull bars. The selloff of the past 3 weeks on the daily chart is in a tight bear channel. That means that the 1st reversal up will probably be minor, and therefore only a bull leg in the trading range. There will probably be sellers above who will create a lower high.
Bears will then begin to sell, betting on a head and shoulders top the April 12 high would be the left shoulder. Trading ranges always have credible bull and bear patters. The bulls would see a double bottom with the March 16 pullback after the March 10 bull reversal spike. Because the daily chart has fallen in a series of sell climaxes, it will probably bounce this week.
With the FOMC meeting on June 24, the odds are that the trading range will probably continue up to the report. It might then have a big breakout up or down. Since the monthly chart has a double top bear flag at the 20 month moving average, the bears have a slight advantage. However, it might take many more months before the bears win, if they are to win.
In the meantime, the bulls on the daily chart can continue to create legs up and down. Since the daily chart is oversold and at support, it probably will try to bounce this week. There is still a measured move target below at around 1.
If it comes before and is not too strong, the measured move magnet might still draw the market down to it before the bulls can test up to the middle of the 2 month range. If this selloff is a resumption of the bear trend on the monthly chart, it could fall relentlessly for several months. However, this strong selling is not yet present on the daily chart, and a trading range is more likely over the next few weeks.
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