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Equities Markets at a Tipping Point

Equities markets were biding their time on Monday and Tuesday of this week, waiting for the election to be completed. Nevertheless, the markets are at a critical decision point, having tested important supports and having run into what could be decisive resistance. Here we present a snapshot of what's happening with two major indices.

The DJIA met an important 1x1 extension in October, and now has fallen back to the lower boundary of what looks like a wedge formation. Note also that the operative 77-week cycle has crested and should now be on the decline. If the lower boundary of the wedge breaks on the weekly chart, we would expect a sharp decline.

On the daily chart, DJIA might have completed five waves down from October 5. If so, then a retrace into at least the 38.2% level (13,275) would be expected, and the 61.8% level (13,424) would be the next likely target for a possible '(ii)' wave. The daily chart also presents the Fibonacci extensions that could serve as support levels below the wedge boundary, although in a strong down-move those levels would be little more than speedbumps.

The Global Dow offers what we think is a clearer wave count, and it also appears to be leaning on support. If the 1910.25 level is lost, then this index is likely to break sharply lower.

In conjunction with equities meeting resistance, we also have seen possible reversals in several currencies during the past month, and that will be the subject of a follow-up post.

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