Let's start with a snippet from the 5 minute chart...
Friday was a tricky day (predictable in hindsight) - as we closed near the bottom of the descending channel Thursday and were due for a bounce around 1025. Of course, the jobs data did not cooperate and caused an extreme downward move on open. You can see this on the 5 minute chart with a clear break and acceleration as it crossed the bottom trend line. Once the major sell reaction completed, price action retraced but was met with a fair amount of resistance - as it is stuck in a price gravity band which I do plan to publish a paper about some day.
Interestingly enough, we closed at 1025 which is exactly where I predicted at the start of this week. Again, this is significant because it shows that the market is starting to behave according to technicals again.
Many folks are speculating that we are in the start of a 5 wave EWT - with waves 1, 2 and the first half of 3 complete. It is possible and such an EWT could put us down at my target zone of 990-960. I think the best view of this is on the hourly if you want to make trading decisions on the theory. I have supplied it here for your review.
I am more focused on the Daily closing price line chart right now. Open that here:
As you can see price action has closed below the 20p MA and is headed for the 50p MA. We are also right on the bottom trend line of the prior up channel. We have to watch carefully here for a break and an attempt at the lower BB - around 1000. I think this is very possible and could represent the completion of an ugly head in a H&S reversal pattern that I have anticipated. If this is going to happen, I expect we get to 1000 in a solid thrust - closing at this psychological level before a bounce and attempt at the right shoulder. Why did I suggest a solid down thrust? Two reasons. First, there is a low density gap sitting right below the 50p MA and trend line. This means that there is no natural support from prior price action here. If we break 50p MA and the lower trend line, program selling kicks in hard and there are no stops until 1013 - and that is a relatively weak 38% retracement level which has failed in the past. The second reason is that market price mirrors past action. Look how sharp the ascent was on the left side of this head. We should see a sharp decline on the right side.
Longer term - we see the lonely 200p MA way down around 900. You can now hear analysts making statements that touching the 200p MA would be good for this bull market and not to worry if and when it happens. This is a good sign.
I expect a down move to 1000 and then a bounce. If we do not get that - I am skeptical of a correction and will re-evaluate.
Good luck out there!
2 comments:
Hi David , sorry to hear about you issues with futures , this is hard enough without additional issues.
That would be a very ugly H$S head ,
but I see it to.
The 50ma is coming up the trend line is down , somethings gotta give.
Do you think it would be good for the bulls if we hit the 200ma and bounce off ? Breaking it would be very Bearish but would hitting it be good for the Bulls ?
On a Non TA note , I am sure I dont understand the $ action on Friday , to add to my confusion it rebounded sharply shortly after market close.
Wednesday reaction to Alcoa numbers will , show some direction.
Lets hope we are not out of our minds . Thanks and Best of luck
I think you are going to find out soon enough if you get your correction. Should find out in a few minutes.
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