We had been nervous for a few weeks over the possibility of a profit taking snap emerging. So the recent minor sell-off has come as no major surprise.
We can see how price action has “only” dropped down to the lower end of the existing bullish trend channels. So little technical damage has been done on this move, so far.
In order to turn more nervous we would need to see price further into the older bullish trading range, blue region, currently under 5450. Buyers have already been tempted in, on the recent selling, on the hopes that the “buy on dips” strategy that has proved so profitable for so many months now will be good for at least one more leg higher.
However there are some very early signs that this buying may be more retail based buying, and less institutional, raising concerns around the Hindenburg Omen we highlighted a few weeks ago.
So for the week ahead this follow through buying may come through with enough scale on the key names that it could lift the wider market back above 5,600. But concerns remain for Q3 ahead and into Q4 as the record breaking run of the inverted US yielded curve continues and we have so much geopolitical uncertainty around the US election and possible international flash points in Ukraine/Russia, Israel/Gaza/Lebanon, China/Taiwan but that until/unless we see price action consolidate under the 5,400 area we remain in a strong bullish trend.