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Equity Q4 Technical Forecast: Risk of Decline Appears Highest in Final Quarter

Equity Q4 Technical Forecast: Risk of Decline Appears Highest in Final Quarter

2019-10-05 10:00:00
Paul Robinson, Strategist
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Equity Technical Forecast:

Equity Q4 Technical Forecast: Risk of Decline Appears Highest in Final Quarter

The third quarter was a relatively quiet one compared to the prior few when the market experienced some sizable volatility. It may well turn out to the be the quiet before the storm, though, with a couple of technical developments pointing towards a potential decline coming soon. It could prove a redux of sorts of last year.

S&P 500 Weekly Chart

S&P 500 Weekly Chart

Longer-term, the Reverse Symmetrical Triangle (RST) is in play with the S&P having made a decisive drive to a new high in Q3. The increasingly large swings since the January 2018 top are creating higher-highs and lower-lows, which make up the RST. The expansion in price swings indicates growing instability. A resolution could be nearing as the third peak is typically the final one if the pattern is indeed going to lead to a top.

Heading into the final stretch of the year the market appears at real risk of a material decline. A drop through the August low at 2822 and the 200-day MA could spark momentum to build towards testing the 2009-current bull-market trend-line situated down under 2600.

On the top-side, even if the market can continue higher, it isn’t clear how sustainable it will be with new highs over the past two year unable to rouse meaningful momentum before sellers show up

To view the full forecast for the Dow Jones, Nasdaq, DAX 30, FTSE 100 and more, download our free Fourth Quarter Equity Forecast.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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