Heavy blow to the stock market

U.S stock market ready for another round of sell-off today after global market suffers deep retracement today. Although the sell-off is severe, it is the long-awaited correction and within expectation. Traders might think the rate of descending is swift.

Calculating the correction in Dow Jones Industrial Averages since Trump elected as President. Dow Jones Industrial Averages gained from 18,000 to as high as 26,616.71 which is 8616.71 points gain. The index currently sits at 24,345 or down 2,271.71 points which is 26% correction.

Average correction in each bear market range between 30-40% from the top. If we use 26,616.71 as the top, we might see Dow Jones Industrial Averages down to 15,970 – 18,631.70. Will the index enter bear market and fall to the level?

Asian & European Stock market

Asian stock market trade heavily sold. Nikkei down 1,071.84 points (-4.73%) to 21,610.24, Shang Hai Composite down 117.79 points (-3.38%) to 3,369.71 and Australia ASX 200 down 192.90 points (-3.20%) to 5,833.30. European stock market also dropped. DAX Germany down 2.35%, FTSE UK down 2.04%, and Euro STOXX 600 down 2.36%.

Technical Analysis

Dow Jones Industrial Average (INDU)

DJIA is in critical level after dropped more than 1,000 points Yesterday. The index only needs two days to reach the daily SMA 100 and looks will continue moving downside. Today the index futures down more than 300 points before market open. If the index loses the averages, we might enter medium-term bearish trend.

Under the bearish situation, it is better for traders to adopt buy at the very low level and hold it for long-term. The stock market is at risk to enter a bear market.