I'll start out with this chart;
As you can see, the market had broken out over the left shoulder of the potential head and shoulders pattern, then the sell off on Friday broke back below then rallied and closed just above that level.
As of Friday we were still holding a breakout, although at very overbought levels.
Looking at the futures tonight, it looks like this market may lose that support and head back down for what could look more and more like a 6 month long head and shoulders pattern.
Another point of insight is that this current rally obviously has 3 clear waves. From an Elliot Wave prespective, either we have a short pullback here for a wave 4 and then continue up for wave 5 OR this was an ABC corrective ending in only 3 waves. IF this move was a corrective move, that would mean it's a larger wave 2 and we are in fact about to embark on a large wave 3 down.
Our next move could eventually tell us whether we are already in the middle of a large turn down or we have new highs ahead of us.
If we go below 1293, per Elliot rules, we would invalidate the possibility that this is a 5 wave rally with another big up wave left. So, that is a line in the sand.
Here's our 30min chart picture;
From a shorter term prespective, we have broken that severe uptrend line and our first stop will be to test the top of the previous channel. Which will be somewhere between 1315 and 1320 depending on how long it takes to get there.
Below that would be the bottom of the channel between 1280 and 1290. I would think that 1290-1293 area will be critical for the bulls.
Because that area is critical I would put a high probability that we test it, just because that's how the market works. But only if we take out that first support at 1320 or so.
If we hold 1320 and head back up strong, we likely have a 5 wave move and there will be one more big push north, probably to new 52 week highs.
Like I said on Thursday though, I have no idea whats going to happen here, we are in a flux zone. We could flash crash tomorrow or rally to 1500. A little more time should give us a better idea.
GL
CJ
2 comments:
Thanks for the update CJ.
From a sentiment standpoint, as long as 90% of the retail investors remain all beared-up, this market is going higher, as in new highs higher. I will continue playing the long side since it's much easier making money in a bull market being a bull (LOL). When the forum gets all bulled up, I know it'll be time to exit.
this market is tough to get a gauge on sentiment. we are up 600 points over a week and then down 250 points in 2 days..
that's the biggest factor hinting that this action is bearish... the wild swings. Not a hallmark of bull markets.
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