The bearish ABC pattern shown yields the maximum downside target I can project using the intraday charts. If the 16343 target is achieved, it would imply a further fall of 118 points from Friday’s settlement price and an 11% decline from the all-time high achieved in June. Regardless, the plunge has already done significant technical damage to all charts up to the level of the daily bars. It could grow still worse if the plunge were to continue unabated, surpassing last October’s watershed low at 15855. That would generate the most powerful bearish impulse leg we’ve seen on the weekly chart since the bull market began in March 2009. We’ll have a good opportunity to assess the bear’s strength once we’ve seen stocks bounce and the downtrend resume. If that leg is weak and bounced sharply from its midpoint pivot, it could signal the return of the bull, along with a possible shot at new all-time highs. All of this remains speculative at this point, but we should know before long whether last week’s selloff is just a correction or the likely start of a powerful bear market.
