I don't usually do TA for the stock markets but I couldn't help myself today after the DOW saw the largest point gain in a single day of trading EVER. The market started off looking pretty rough this morning after we closed on Christmas Eve at the lowest point of the year. We were due for a bounce back up but this was pretty significant and set off alarm bells for me. The market has been long overdue for a crash and I have been calling for it all year- there was the single largest point drop this past February when the DOW lost nearly 1200 points.

For more than a week the market has been in straight decline and this is for many reasons. Firstly there are geopolitical issues that are being caused by both the US and China with the trade disputes. Secondly there is a lot of government uncertainty with the partial shutdowns over budgets and policy. After having a seriously rough week of trading the market was just happy for a relief rally today. However this has left us in extremely overbought conditions for opening trading tomorrow and no doubt we will see a quick drop back down before any more upward motion.

The moving average on the hourly chart is right below 22,400 and the high ranges 23,200 and low ranges at 21,550. Considering that we opened trading today just under 21,900 a drop back below the 22,000 level is not out of the picture. I would say that first thing in the morning there will be a slight sell off to put us back near the mid 22,000 zone before the market rallies back past 23,000 by day's end. Many are calling this a dead cat bounce and I don't necessarily disagree.

Looking at the weekly charts you can see that we have gone way above the 200MA over the past five years of trading having only returned a couple of times. This line represents a major support level for the market and in a bear scenario you can expect it to be tested. I think that in Q1 2019 we will see the DOW drop below the 21,000 point and as far as the 16,000-18,000 levels.

However in the short term I definitely think that a rally back past the 24,000 area is more than possible as the market stumbles to regain some balance. From there we will see a series of major sell-offs that will set us back into another recession by 2020. There are still many people that will be blindly believing in the strength of the economy even in the midst of contradicting facts. All markets have bubble cycles and the stock markets are not immune to that so we will see an eventual decline just like we have seen in the crypto markets.

*Never invest more than you are willing to lose and always do your own research before making any investment decisions. I am NOT a financial advisor and this is NOT financial advice- this material is intended for entertainment and informational purposes only. Hit "CTRL + or CTRL -" to change size of chart. (All pictures are free domain images created by myself with the help of tradingview.com.)