The stock market faces ‘unlimited downside risk,’ warns veteran trader

The stock market opened with a resounding thud on Tuesday morning, as the Dow Jones Industrial Average, at one point, had shed more than 500 points. The S&P 500 index and the Nasdaq Composite endured even harder hits, down more than 2% each.

So, you must positioning yourself for that tasty bounce we’ve grown accustomed to over the course of this stubborn bull market. Well, don’t, warns J.C. Parets, the technical analyst behind the All Star Charts blog.

“There is unlimited downside risk in the market right now and I don’t think it’s being respected,” he wrote. “It’s not until afterwards that they ask, ‘what happened?’” When the bottom falls out, that’s when the blaming begins.

“The Fed, the Trump, the ebola, or whatever excuse du jour is being regurgitated on the various media outlets,” Parets wrote. “The only one to blame is ourselves.”

He pointed to several divergences that should make clear to investors just how precarious the market situation is at these current levels. The first one is what we’re seeing in this chart of the S&P vs. the rest of the world.

 

Read the full article here on Marketwatch By Shawn Langlois

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