Wednesday’s session wasn’t for the faint of heart. The Dow Jones Industrial Average fell 800 points from the previous day’s close, and as financial media was quick to point out, the largest loss in 2019. While that is a noteworthy statistic the index is no stranger to significant declines. In December, prices fell more than 4,000 points over the course of 16 trading days. In October, the $DJI fell nearly 3000 points over 19 days. This brings us to today’s decline. Wednesday’s 3% loss leaves us with nearly a 2000 points pared from the all-time highs made nearly a month ago during July’s peak. This leaves me with a basic way of thinking that suggests this week’s lows need to hold, or we’re likely in for a larger decline – something like that 3,000 or 4,000 point range we’ve seen previously wouldn’t be that out of line. It would just be doing something similar to what it’s done in the past.
If we do start taking out those lows, rather than just “looking for a 4,000 point drop from the all-time highs,” I’ve noted some Fibonacci levels that may be of interest and offer a unique confluence with the analysis shared above. By taking the most recent major swing (the December lows up to the July high), we see a .618 retracement of 23884.64. If you look at the extension of the June 3rd low against that same July high, you’ll see the 1.272 level at 23941. Any time these levels have a confluence, or fairly close relationship in price, I’ll pay close attention to them as they may offer a place for the market to shift – meaningful support. Also, note that if we did make these targets that would be right at a 3500 point decline from the July highs. After we’ve made those corrections in the past, we were able to find good bottoms, and if history repeats itself, that will be the area I consider going long for bullish movement into the end of the year.
But, it’s gotta get a little worse before it can get much better.