I have produced a projection here with both a projection based upon current short term cycles which are the red lines which project about 6-8% expected declines over the next week from today's highs.
This would be in the higher (more negative) middle of the range of back tested past similar price pattern to our recent few weeks.
I back tested some failed reversals similar to last week's (which has not failed yet), and saw that similar setups have declined on the order of 10-20% within a week or 2 after a close below the failed reversal.
So that would put us towards the lower portion of the red rectangle on the chart.
That chart shows a price a time window based upon some projections of various portions of the declines that have occurred since the February top.
So if the correction is NOT over yet (which is my bet), then expect a pretty sizeable sell off from here, that could get wild and volatile quickly and be bigger than most people would expect.
From a technical and program trading standpoint, the 200 day moving average is towards the top of that projection range, and that would be the next algorithmic buy point that could see a buying surge if it is touched.
NOW.....IF....prices were to decline to the 200 day average and rebound, a further break to new lows could be a continuation or acceleration of the downtrend point in my opinion.
If have seen many times over the years where prices decline to the commonly watched moving averages and make a short-term rebound after touching them. I have learned to expect that, and to often recognize the signs that they are just "blips" of automated trading but often don't really reflect a true reversal.
In summary, I believe there is high risk and pretty high odds of some declines from here for days or weeks. I think it would be wise to NOT be long stocks moving forward until the negative cycle window has passed.
Pete
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